EXHIBIT 10.10
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of the 10th day of July 2000, by and between
Xxxxxxx Resources Corporation (the "Company") and Xxxxxx X. Xxxxxxx (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure his continued dedication and efforts in such event without undue concern
for his personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event his employment is
terminated as a result of, or in connection with, a Change in Control and to
provide the Executive with certain other benefits whether or not the Executive's
employment is terminated.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of the date hereof
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and shall continue in effect until December 31, 2000; provided, however, that on
December 31, 2000 and on each anniversary thereof, the term of this Agreement
shall automatically be extended for one year unless either the Company or the
Executive shall have given written notice to the other prior thereto that the
term of this Agreement shall not be so extended; and provided, further, however,
that notwithstanding any such notice by the Company not to extend, the term of
this Agreement shall not expire prior to the expiration of thirty-six (36)
months after the occurrence of a Change in Control.
2. Definitions.
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2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
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Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid
as of the Termination Date including (i) base salary, (ii) reimbursement for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the
period ending on the Termination Date, (iii) vacation and sick leave pay (to
the extent provided by Company policy or applicable law), and (iv) bonuses and
incentive compensation.
2.2. Base Amount. For purposes of this Agreement, "Base Amount"
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shall mean the greater of (a) the Executive's annual base salary at the rate
in effect immediately prior to the Change in Control and (b) the Executive's
annual base salary at the rate in effect on the Termination Date, and shall
include all amounts of his base salary that are deferred under the qualified
and non-qualified employee benefit plans of the Company or any other agreement
or arrangement.
2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount"
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shall mean the greater of the Executive's most recent annual bonus paid during
the twelve months preceding a Change in Control and the Executive's most
recent annual bonus paid during the twelve months preceding the Termination
Date.
2.4. Cause. For purposes of this Agreement, a termination of
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employment is for "Cause" if the Executive has been convicted of a felony
involving moral turpitude or the termination is evidenced by a resolution
adopted in good faith by two-thirds of the Board that the Executive (a)
intentionally and continually failed substantially to perform his reasonably
assigned duties with the Company (other than a failure resulting from the
Executive's incapacity due to physical or mental illness or from the
Executive's assignment of duties that would constitute "Good Reason" as
hereinafter defined) which failure continued for a period of at least thirty
days after a written notice of demand for substantial performance has been
delivered to the Executive specifying the manner in which the Executive has
failed substantially to perform, or (b) intentionally engaged in conduct which
is demonstrably and materially injurious to the Company; provided, however,
that no termination of the Executive's employment shall be for Cause until (x)
there shall have been delivered to the Executive a copy of a written notice
setting forth that the Executive was guilty of the conduct set forth in this
Section 2.4 and specifying the particulars thereof in detail, and (y) the
Executive shall have been provided an opportunity to be heard in person by the
Board (with the assistance of the Executive's counsel if the Executive so
desires). Neither an act nor a failure to act, on the Executive's part shall
be considered "intentional" unless the Executive has acted or failed to act
with a lack of good faith and with a lack of reasonable belief that the
Executive's action or failure to act was in the best interest of the Company.
Notwithstanding anything contained in this Agreement to the contrary, no
failure to perform by the Executive after a Notice of Termination is given by
the Executive shall constitute Cause for purposes of this Agreement.
2.5. Change in Control. For purposes of this Agreement, a "Change in
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Control" shall mean any of the following events:
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(a) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"))
immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the 0000 Xxx) of thirty percent or
more of the combined voting power of the Company's then outstanding Voting
Securities; provided, however, that in determining whether a Change in
Control has occurred, Voting Securities which are acquired in a "Non-
Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (1) an employee benefit plan (or
a trust forming a part thereof) maintained by (x) the Company or (y) any
corporation or other Person of which a majority of its voting power or its
equity securities or equity interest is owned directly or indirectly by the
Company (a "Subsidiary"), (2) the Company or any Subsidiary, or (3) any
Person in connection with a "Non-Control Transaction."
(b) The individuals who, as of the date hereof, are members of
the Board (the "Incumbent Board"), cease for any reason to constitute at
least two-thirds of the Board; provided, however, that if the election, or
nomination for election by the Company's stockholders, of any new director
was approved by a vote of at least two-thirds of the then Incumbent Board,
such new director shall, for purposes of this Agreement, be considered as a
member of the Incumbent Board; provided, further, however, that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated
under the 0000 Xxx) or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization involving
the Company, unless
(A) the stockholders of the Company, immediately
before such merger, consolidation or reorganization, own, directly
or indirectly, immediately following such merger, consolidation or
reorganization, at least sixty percent of the combined voting power
of the outstanding Voting Securities of the corporation resulting
from such merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting
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Securities immediately before such merger, consolidation or
reorganization, and
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute at least two-thirds of the members of the board of
directors of the Surviving Corporation or a corporation
beneficially owning, directly or indirectly, a majority of the
Voting Securities of the Surviving Corporation, and
(C) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust forming a part
thereof) maintained by the Company, the Surviving Corporation or
any Subsidiary, or any Person who, immediately prior to such
merger, consolidation or reorganization had Beneficial Ownership of
thirty percent or more of the then outstanding Voting Securities)
owns, directly or indirectly, thirty percent or more of the
combined voting power of the Surviving Corporation's then
outstanding voting securities, and
(D) a transaction described in clauses (A) through
(C) shall herein be referred to as a "Non-Control Transaction";
(2) A complete liquidation or dissolution of the
Company; or
(3) An agreement for the sale or other disposition of
all or substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person, provided that if a Change in
Control would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner of
any additional Voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject Person, then a
Change in Control shall occur.
(d) Notwithstanding anything contained in this Agreement to
the contrary, if the Executive's employment is terminated prior to a Change
in Control
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and the Executive reasonably demonstrates that such termination (i) was at
the request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who effectuates a
Change in Control (a "Third Party") or (ii) otherwise occurred in
connection with, or in anticipation of, a Change in Control which actually
occurs, then for all purposes of this Agreement, the date of a Change in
Control with respect to the Executive shall mean the date immediately prior
to the date of such termination of the Executive's employment.
2.6. Company. For purposes of this Agreement, the "Company" shall
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include the Company's "Successors and Assigns" (as hereinafter defined).
2.7. Disability. For purposes of this Agreement, "Disability" shall
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mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform his duties with the Company for a period of one hundred
eighty consecutive days and the Executive has not returned to his full time
employment prior to the Termination Date as stated in the "Notice of
Termination" (as hereinafter defined).
2.8. Good Reason.
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(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the events or conditions
described in subsections (1) through (9) hereof:
(1) a change in the Executive's status, title,
position or responsibilities (including reporting responsibilities)
which, in the Executive's reasonable judgment, represents an adverse
change from his status, title, position or responsibilities as in
effect at any time within ninety days preceding the date of a Change
in Control or at any time thereafter; the assignment to the Executive
of any duties or responsibilities which, in the Executive's reasonable
judgment, are inconsistent with his status, title, position or
responsibilities as in effect at any time within ninety days preceding
the date of a Change in Control or at any time thereafter; or any
removal of the Executive from or failure to reappoint or reelect him
to any of such offices or positions, except in connection with the
termination of his employment for Disability, Cause, as a result of
his death or by the Executive other than for Good Reason,
provided, however, that, for purposes of this Section 2.8(a)(1), the
fact that a Change in Control has occurred, in and of itself, shall
not be deemed to constitute Good Reason;
(2) a reduction in the Executive's base salary or any
failure to pay the Executive any compensation or benefits to which he
is entitled within five days of notice thereof;
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(3) the Company's requiring the Executive to be based
at any place outside a 25-mile radius from his current place of
employment, except for reasonably required travel on the Company's
business which is not materially greater than such travel requirements
prior to the Change in Control;
(4) the failure by the Company to provide the
Executive with compensation and benefits, in the aggregate, at least
equal (in terms of benefit levels and/or reward opportunities) to
those provided for under each other employee benefit plan, program and
practice in which the Executive was participating at any time within
ninety days preceding the date of a Change in Control or at any time
thereafter;
(5) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy of the Company,
which petition is not dismissed within sixty days;
(6) any material breach by the Company of any
provision of this Agreement;
(7) any purported termination of the Executive's
employment for Cause by the Company which does not comply with the
terms of Section 2.4;
(8) any event or occurrence constituting "good reason,"
as it may be defined in any agreement between the Executive and the
Company or any of its affiliates; or
(9) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to
assume and agree to perform this Agreement, as contemplated in Section
7 hereof.
(b) Any event or condition described in Section 2.8(a)(1)
through (9) which occurs prior to a Change in Control but which the
Executive reasonably demonstrates (1) was at the request of a Third Party,
or (2) otherwise arose in connection with, or in anticipation of, a Change
in Control which actually occurs, shall constitute Good Reason for purposes
of this Agreement notwithstanding that it occurred prior to the Change in
Control.
(c) The Executive's right to terminate his employment
pursuant to this Section 2.8 shall not be affected by his incapacity due to
a Disability
2.9. Notice of Termination. For purposes of this Agreement,
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following a Change in Control, "Notice of Termination" shall mean a written
notice of termination from the Company of the Executive's employment which
indicates the specific
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termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
2.10. Successors and Assigns. For purposes of this Agreement,
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"Successors and Assigns" shall mean a corporation or other entity acquiring
all or substantially all the assets and business of the Company whether by
operation of law or otherwise, and any affiliate of such Successors and
Assigns.
2.11. Termination Date. For purposes of this Agreement, "Termination
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Date" shall mean (a) in the case of the Executive's death, his date of death,
(b) in the case of Good Reason, the last day of his employment, and (b) in all
other cases, the date specified in the Notice of Termination; provided,
however, that if the Executive's employment is terminated by the Company for
Cause or due to Disability, the date specified in the Notice of Termination
shall be at least 30 days from the date the Notice of Termination is given to
the Executive, provided that in the case of Disability the Executive shall not
have returned to the full-time performance of his duties during such period of
at least 30 days.
3. Termination of Employment.
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3.1 Severance Pay and Benefits. If, during the term of this
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Agreement, the Executive shall cease to be employed by Company within thirty-
six (36) months following a Change in Control, the Executive shall be entitled
to the following compensation and benefits:
(a) If the Executive's employment with the Company shall be
terminated: (i) by the Company for Cause or Disability; (ii) by reason of
the Executive's death; (iii) by the Executive other than for Good Reason;
or (iv) after the Executive has reached his or her Normal Retirement Date
(as that term is defined as of the date hereof in the Company's 401(k)
Plan), the Company shall pay to the Executive the Accrued Compensation.
(b) If the Executive's employment with the Company shall be
terminated before the Executive's death and Normal Retirement Date either
(i) by the Company other than for Cause or Disability or (ii) by the
Executive for Good Reason, the Executive shall be entitled to the
following:
(1) the Company shall pay the Executive all Accrued
Compensation;
(2) the Company shall pay the Executive as severance
pay and in lieu of any further compensation for periods subsequent to
the
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Termination Date, in a single payment an amount in cash equal to
three times the sum of (A) the Base Amount and (B) the Bonus Amount;
and
(3) for a period of thirty-six (36) months following
the Termination Date (the "Continuation Period"), the Company shall at
its expense continue on behalf of the Executive and his dependents and
beneficiaries the medical, dental and hospitalization benefits
provided (x) to the Executive at any time during the thirty (30) day
period prior to the Change in Control or at any time thereafter or (y)
to other similarly situated executives who continue in the employ of
the Company during the Continuation Period. The coverage and benefits
(including deductibles and costs) provided in this Section 3.1(b)(3)
during the Continuation Period shall be no less favorable to the
Executive and his dependents and beneficiaries, than the most
favorable of such coverages and benefits during any of the periods
referred to in clauses (x) and (y) above. The Company's obligation
hereunder with respect to the foregoing benefits shall be limited to
the extent that the Executive obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may
reduce the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and benefits of
the combined benefit plans is no less favorable to the Executive than
the coverages and benefits required to be provided hereunder. This
subsection (3) shall not be interpreted so as to limit any benefits to
which the Executive, his dependents or beneficiaries may be entitled
under any of the Company's employee benefit plans, programs or
practices following the Executive's termination of employment,
including without limitation, retiree medical and life insurance
benefits;
3.2 Payment Form. The amounts provided for in Sections 3.1(a) and
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3.1(b)(1) and (2) shall be paid in a single lump sum cash payment within 10
business days after the Executive's Termination Date (or earlier, if required
by applicable law).
3.3 No mitigation. The Executive shall not be required to mitigate
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the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in Section 3.1(b)(3).
3.4 Other severance arrangements. If the Executive is entitled to
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severance pay and benefits pursuant to this Agreement following a Change in
Control, the following shall apply:
(a) The severance pay and benefits provided for in this
Section 3 shall be reduced by the amount of any other severance or
termination pay to which
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the Executive may be entitled under any agreement with the Company or any
of its Affiliates.
(b) The Executive's entitlement to any other compensation or
benefits or any indemnification shall be determined in accordance with the
Company's employee benefit plans and other applicable programs, policies
and practices or any indemnification agreement then in effect.
4. Notice of Termination. Following a Change in Control, any purported
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termination of the Executive's employment by the Company shall be communicated
by Notice of Termination to the Executive. For purposes of this Agreement, no
such purported termination shall be effective without such Notice of
Termination.
5. Excise Tax Limitation.
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5.1 Notwithstanding anything contained in this Agreement to the
contrary, to the extent that the payments and benefits provided under this
Agreement and benefits provided to, or for the benefit of, the Executive under
any other Company plan or agreement (such payments or benefits are
collectively referred to as the "Payments") would be subject to the excise tax
(the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Payments shall be reduced (but not below
zero) if and to the extent necessary so that no Payment to be made or benefit
to be provided to the Executive shall be subject to the Excise Tax (such
reduced amount is hereinafter referred to as the "Limited Payment Amount").
Unless the Executive shall have given prior written notice specifying a
different order to the Company to effectuate the foregoing, the Company shall
reduce or eliminate the Payments, by first reducing or eliminating the portion
of the Payments which are not payable in cash and then by reducing or
eliminating cash payments, in each case in reverse order beginning with
payments or benefits which are to be paid the farthest in time from the
Determination (as hereinafter defined). Any notice given by the Executive
pursuant to the preceding sentence shall take precedence over the provisions
of any other plan, arrangement or agreement governing the Executive's rights
and entitlements to any benefits or compensation.
5.2 The determination of whether the Payments shall be reduced to the
Limited Payment Amount pursuant to this Agreement and the amount of such
Limited Payment Amount shall be made, at the Company's expense, by an
accounting firm selected by the Executive which is one of the six largest
accounting firms in the United States (the "Accounting Firm"). The Accounting
Firm shall provide its determination (the "Determination"), together with
detailed supporting calculations and documentation to the Company and the
Executive within ten days of the Termination Date, if applicable, or such
other time as requested by the Company or by the Executive (provided the
Executive reasonably believes that any of the Payments
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may be subject to the Excise Tax) and if the Accounting Firm determines that
no Excise Tax is payable by the Executive with respect to the Payments, it
shall furnish the Executive with an opinion reasonably acceptable to the
Executive that no Excise Tax will be imposed with respect to any such
Payments. The Determination shall be binding, final and conclusive upon the
Company and the Executive.
6. Successors; Binding Agreement.
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6.1. This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns, and the Company shall
require any Successors and Assigns 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 or assignment had taken
place.
6.2. Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal personal representative.
7. Fees and Expenses. The Company shall pay all legal fees and related
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expenses (including the costs of experts, evidence and counsel) reasonably
incurred by the Executive as they become due as a result of (a) the Executive
seeking to obtain or enforce any right or benefit provided by this Agreement
(including, but not limited to, any such fees and expenses incurred in
connection with the Dispute, and (b) the Executive's hearing before the Board as
contemplated in Section 2.4 of this Agreement; provided, however, that the
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circumstances set forth in clause (a) (other than as a result of the Executive's
termination of employment under circumstances described in Section 2.5(d))
occurred on or after a Change in Control.
8. Notice. For the purposes of this Agreement, notices and all other
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communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, by overnight courier or by facsimile, addressed to the
respective addresses and facsimile numbers last given by each party to the
other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
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limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company (except for any
severance or termination
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policies, plans, programs or practices) and for which the Executive may qualify,
nor shall anything herein limit or reduce such rights as the Executive may have
under any other agreements with the Company (except for any severance or
termination agreement). Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan or program of the Company shall
be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.
10. No Guaranteed Employment. The Executive and the Company acknowledge
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that, except as may otherwise be provided under any other written agreement
between the Executive and the Company, the employment of the Executive by the
Company is "at will" and may be terminated by either the Executive or the
Company at any time.
11. Settlement of Claims. The Company's obligation to make the payments
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provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others.
12. Mutual Non-Disparagement. The Company, its affiliates and
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subsidiaries agree and the Company shall use its best efforts to cause their
respective executive officers and directors to agree, that they will not make or
publish any statement critical of the Executive, or in any way adversely
affecting or otherwise maligning the Executive's reputation. The Executive
agrees that it will not make or publish any statement critical of the Company,
its affiliates and their respective executive officers and directors, or in any
way adversely affecting or otherwise maligning the business or reputation of any
member of the Company, its affiliates and subsidiaries and their respective
officers, directors and employees.
13. Miscellaneous. No provision of this Agreement may be modified, waived
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or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.
14. Governing Law. This Agreement shall be governed by and construed and
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enforced in accordance with the laws of the State of Colorado without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement
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shall be brought and maintained in a court of competent jurisdiction in the City
and County of Denver in the State of Colorado.
15. Severability. The provisions of this Agreement shall be deemed
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severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof, and, in
such event, such provision shall be changed and interpreted so as to best
accomplish the objectives of such invalid or unenforceable provision within the
limits of applicable law or applicable court decisions.
16. Entire Agreement. This Agreement constitutes the entire agreement
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between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
By /s/ Xxxxx X. Dea
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Xxxxx Xxx
Chief Executive Officer
Xxxxxxx Resources Corp.
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
ATTEST: By: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx
Secretary
Xxxxxxx Resources Corp.
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