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EXHIBIT 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter called this "Agreement") is
entered into effective as of December 2, 1996 (the "Effective Date"), by and
between MARINER ENERGY, INC. (hereinafter called "Company") and ▇▇▇▇▇ ▇. ▇▇▇▇
(hereinafter called "Employee").
WHEREAS, Company desires to employ Employee upon the terms and
conditions set forth herein; and
WHEREAS, Employee desires to be employed by Company upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Employment.
Company hereby employs Employee to serve as Vice President -
Finance and Chief Financial Officer of Company. The permanent
place of Employee's employment shall be at a location within a
50-mile radius of the central business district of the City of
Houston, Texas; provided, however, Employee shall be required to
undertake such ordinary and usual travel as is necessary to
properly discharge his duties and responsibilities hereunder.
Employee hereby accepts such employment, and agrees to serve
Company faithfully, diligently and in a good and workmanlike
manner.
2. Term.
The term of employment shall be for a term of one (1) year
beginning on the Effective Date (the "initial term"), subject,
however, to the provisions of paragraph 3.
3. Extension and Termination.
3.1 If either Employee or Company elects to terminate this
Agreement at the end of the initial term, or at the end of
any extended term hereof as hereinafter provided, notice
of the election to terminate shall be given to the other
party no later than six (6) months before the end of this
Agreement. Except as otherwise provided in paragraph
21.1, if no such six-month notice is given by either party
on or before June 2, 1997, the initial term shall be
deemed to have been extended for an additional one and
one-half (1 1/2) years through June 1, 1999 (the "first
extended term"), and thereafter if no such six-month
notice is given by either party before the end of the
first extended term, or at the end of any subsequent
extended
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term, the first extended term and any such subsequent
extended term of this Agreement, as the case may be, shall
be deemed to have been extended for an additional six (6)
months.
3.2 In the event Company elects to terminate this Agreement as
provided in paragraph 3.1 above:
3.2.1 Company shall pay to Employee his salary and other
benefits provided elsewhere in this Agreement for
Employee's services rendered to Company hereunder
through the end of such term or extended term.
3.2.2 Company shall pay to Employee, on or before the
last day of his employment hereunder, a lump sum
cash payment equal to six (6) months' salary at
Employee's monthly rate for the month immediately
preceding the month in which Company elects to
terminate this Agreement.
3.2.3 Company shall pay to Employee, on or before the
last day of his employment hereunder, a lump sum
cash payment for all (a) vacation time carried
forward from a previous year in accordance with
paragraph 8, and (b) all earned and unused vacation
time for the then current year. Earned vacation
time shall, for the purpose of this paragraph, be
calculated by dividing the number of days in the
calendar year which have transpired by 365, and
then multiplying the result by the number of
vacation days to which Employee is entitled for
that year pursuant to paragraph 8.
3.2.4 If Employee has a leased automobile, the lease
payments on which are guaranteed by Company,
Employee shall have the option, to be exercised on
or before the last day of his employment hereunder,
of assuming the remaining lease payments and
retaining the automobile, or assigning the lease
agreement to Company in return for Company's
agreement to assume the remaining lease payments.
3.2.5 Interests vested in Employee under paragraph 9 of
this Agreement shall be assigned in due course in
compliance with paragraph 9.4. Company and
Employee agree that the promises, covenants and
undertakings of paragraph 9 shall survive the
termination of employment of Employee and shall be
binding on all assigns of Company.
3.3 In the event Employee elects to terminate this Agreement
as provided in paragraph 3.1 above:
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3.3.1 Employee agrees to serve to the end of the term, or
extended term hereof, unless waived by Company.
3.3.2 The provisions of paragraphs 3.2.1, 3.2.3, 3.2.4,
and 3.2.5 shall be applicable, but Employee shall
not be entitled to the payment provided for in
paragraph 3.2.2.
3.4 Company may at its option consent to a request by Employee
to terminate this Agreement at a time other than that
stated in paragraph 2, as extended, in which case the date
requested by Employee and agreed to by Company will be the
end of the term of this Agreement and the provisions of
paragraph 3.3 shall be applicable.
3.5 Company may terminate this Agreement for "Cause" (as
hereinafter defined in this paragraph 3.5) upon written
notice of such termination to Employee by Company. Any
termination of this Agreement by Company for Cause shall
be effective thirty (30) days after written notice of
termination for Cause is given by Company to Employee. If
Company terminates this Agreement for Cause, Company shall
have no liability or obligation to Employee thereafter
under this Agreement except (i) for the payment of his
salary and other benefits through the month of discharge,
prorated in the case of salary for the month of discharge
on a daily basis to the date of termination, and (ii) that
the provisions of paragraph 3.2.5 shall be applicable. As
used in this Agreement, the term "Cause" means (a)
Employee is found guilty of, admits in writing facts
amounting to, or is held civilly liable for fraud,
embezzlement or dishonesty, (b) Employee is convicted of a
felony involving a crime of moral turpitude or any other
felony if the Board of Directors of the Company in good
faith determines that the continued employment of the
Employee would be materially detrimental to the Company
(in any case which felony through lapse of time or
otherwise is not subject to appeal), (c) Employee
knowingly discloses trade secrets or confidential Company
matters to unauthorized persons, (d) Employee willfully
breaches or habitually neglects any duties he is required
to perform under the terms of this Agreement and any such
breach or neglect is not cured within thirty (30) days
after Company has provided Employee with written notice of
such breach or neglect, (e) Employee materially breaches
any of the other material terms of this Agreement and any
such breach is not cured within thirty (30) days after the
Company has provided Employee with written notice of such
breach, and (f) the occurrence of an action or finding
described in paragraph 17, except as otherwise provided in
paragraph 17. The waiver by Company of a breach of any
provision of this Agreement by Employee shall not operate
or be construed as a waiver of any subsequent breach by
Employee.
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3.6 In the event Company terminates this Agreement or
discharges Employee other than as provided in paragraphs
3.1, 3.4 or 3.5 above, Employee shall be entitled to
receive on the date of such termination or discharge:
3.6.1 A lump sum cash payment equal to Employee's salary,
at Employee's monthly rate for the month
immediately preceding the month in which such
termination or discharge occurs, for the unexpired
portion of the term or extended term hereof then in
effect.
3.6.2 The payments and other benefits provided for in
paragraphs 3.2.2, 3.2.3, 3.2.4 and 3.2.5 hereof.
3.7 In the event Employee terminates this Agreement for "Good
Reason" (as defined in paragraph 3.9), and prior to such
termination Employee has not terminated this Agreement
under paragraph 3.1 hereof, Employee shall be entitled to
receive from Company on the date of such termination:
3.7.1 A lump sum cash payment equal to Employee's salary,
at Employee's monthly rate in effect at the
effective time of such termination (but prior to
giving effect to any reduction therein which
precipitated such termination), for the unexpired
portion of the term or extended term hereof then in
effect.
3.7.2 A lump sum cash payment equal to six (6) months'
salary, at Employee's rate in effect at the time of
such termination (but prior to giving effect to any
reduction therein which precipitated such
termination).
3.7.3 The payments and other benefits provided for in
paragraphs 3.2.3, 3.2.4 and 3.2.5.
3.8 Any termination of this Agreement by Employee for Good
Reason shall be effective thirty (30) days after written
notice of termination for Good Reason is given by Employee
to Company
3.9 As used in this Agreement, the term "Good Reason" means
any one or more of the following events has occurred:
3.9.1 The assignment to Employee of any duties materially
inconsistent with Employee's position (including
office, title and reporting requirements),
authority, duties or responsibilities with Company
or any other action that results in a material
diminution in, or interference with, such position,
authority, duties or responsibilities, and any
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such assignment or action is not cured within
thirty (30) days after Employee has provided
Company with written notice of such assignment or
action;
3.9.2 The failure to continue to provide Employee with
office space, related facilities and support
personnel (including, but not limited to,
administrative and secretarial assistance) (a) that
are both commensurate with Employee's
responsibilities to and position with Company and
not materially dissimilar to the office space,
related facilities and support personnel provided
to other employees of Company having comparable
responsibility to that of Employee or (b) that are
physically located at Company's principal executive
offices, and any such failure is not cured within
thirty (30) days after Employee has provided
Company with written notice of such failure;
3.9.3 Any (a) reduction in Employee's monthly salary as
established in paragraph 5 (including subsequent
increases), (b) reduction in, discontinuance of, or
failure to allow or continue to allow Employee's
participation in, the incentive compensation
program provided under paragraph 9 hereof, or (c)
reduction in, or failure to allow or continue
Employee's participation in, any employee benefit
plan or program (except when such benefit plan or
program is replaced with another benefit plan,
program or arrangement that provides Employee, in
the aggregate, with reasonably comparable benefits)
in which Employee is participating or is eligible
to participate prior to such reduction or failure
(other than as a result of the expiration of such
plan or program), and any such reduction,
discontinuance or failure is not cured within
thirty (30) days after Employee has provided
Company with written notice of such reduction or
failure;
3.9.4 The relocation of Employee's or Company's principal
office and principal place of Employee's
performance of his duties and responsibilities to a
location more than 50 miles outside of the central
business district of the City of Houston, Texas; or
3.9.5 A breach of any material provision of this
Agreement by Company (other than any breach
described in paragraphs 3.9.1, 3.9.2, 3.9.3, and
3.9.4) which is not cured within thirty (30) days
after Employee has provided Company with written
notice of such breach.
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4. Confidential Information.
4.1 Employee agrees that he will, during the term of this
Agreement, and for a period of four (4) years from the
date of termination of his employment hereunder, keep
secret and confidential and not disclose to any party not
a party to this Agreement, land or lease data, geological
or geophysical data, well data or any other information
which he may receive as a result of the performance of his
duties hereunder, except when disclosure is necessary for
the performance of his duties to Company hereunder. This
paragraph shall not apply to information that is in the
public domain through no action of Employee.
4.2 Upon termination of this employment hereunder, Employee
shall promptly deliver to Company all written information
and documents (whether confidential or not), and all
copies thereof, relating to Company's business and
activities and which are in the possession of or under the
control of Employee.
5. Salary; Signing Bonus
5.1 As compensation for his services rendered to Company
hereunder, Company shall pay to Employee a salary at the
rate of $12,166.67 per month. Employee's salary may be
reviewed at such times as may be determined by Company,
and Company may at its discretion increase this salary.
Employee's salary shall be paid in two equal monthly
installments, payable on the fifteenth and last days of
each month (or on the first business day of Company
thereafter if any such payment date is not a business day
of Company), subject to any and all necessary withholdings
and deductions.
5.2 Company shall pay Employee a bonus in the amount of
$20,000.00 upon the commencement of the initial term of
this Agreement.
6. Automobile Allowance.
Company agrees to pay an automobile allowance of $250.00 dollars
per month to Employee. In addition to such monthly allowance,
Company shall pay, in accordance with Company policy, for all
gasoline, insurance and maintenance required for use of the
automobile.
7. Business Expenses.
Employee is authorized to incur reasonable business expenses in
accordance with Company's policies as may be established from
time to time for promoting the business of Company, including
expenditures for entertainment and travel. Company shall
reimburse Employee from time
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to time for all such business expenses in accordance with those
policies adopted by Company which include, but are not limited
to, the requirement that Employee timely present to Company:
7.1 The amount of the expenditure;
7.2 The time, place and description of the expense;
7.3 The business reason for the expenditure and business
benefit derived or expected to be derived therefrom; and
7.4 The name and occupation of the person or persons
entertained to establish the business relationship with
Company.
With respect to any reimbursable business expense contemplated
above exceeding twenty-five dollars ($25.00), Employee will
furnish documentary evidence of such expense to Company.
8. Vacation.
Employee shall be entitled to an annual vacation leave of twenty
(20) days per calendar year at full pay. The timing and use of
such vacation days shall be requested by Employee and approved by
Company in accordance with its policy. Up to five (5) days of
unused vacation may be carried over from one calendar year to the
next calendar year. Employee shall not be entitled to receive
payment in lieu of unused vacation time except as otherwise
provided herein. With prior approval, vacation may be deferred
if business matters keep Employee from taking his normal
vacation.
9. Incentive Compensation.
9.1 Definitions.
An "AFFILIATE" of a specified person is any person that, directly
or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with that specified
person.
"BENEFICIAL OWNERSHIP" of a security shall be determined in
accordance with Rule 13d-3 promulgated under the Securities
Exchange Act of 1934.
A "CHANGE IN CONTROL" shall have occurred if, after the Effective
Date:
(i) Any person or group of affiliated persons
(other than Joint Energy Development Investments Limited
Partnership ("JEDI") or an affiliate of Enron Corp.) shall
become the beneficial owner, directly or indirectly, of
66-2/3 percent or more of the outstanding Voting Stock of
Newco unless Newco becomes a subsidiary of an entity which
does
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not have a beneficial owner, directly or indirectly, of 66
2/3 percent or more of the outstanding Voting Stock of
such entity (other than JEDI or an affiliate of Enron
Corp.); or
(ii) Newco shall approve (x) a merger or
consolidation of Newco with or into any other person, if
as a result any person (other than JEDI or an affiliate of
Enron Corp.) shall become the beneficial owner, directly
or indirectly, of 66-2/3 percent or more of the
outstanding Voting Stock of Newco unless Newco becomes a
subsidiary of an entity which does not have a beneficial
owner, directly or indirectly, of 66-2/3 percent or more
of the outstanding Voting Stock of such entity (other than
JEDI or an affiliate of Enron Corp.), (y) any sale, lease,
exchange or other transfer of two-thirds or more of the
consolidated assets of Newco and its subsidiaries taken as
a whole in one transaction or a series of related
transactions whether by direct sale of assets, sale of
stock of a subsidiary or a merger involving any
subsidiary, or (z) the dissolution of Newco; or
(iii) Recognizing that the events described in
this clause and the events described in clause (ii) above
may not necessarily be mutually exclusive, any sale,
exchange or other transfer of two-thirds or more of the
outstanding Voting Stock of the Company or any sale,
lease, exchange or other transfer of two-thirds or more of
the consolidated assets of the Company and its
subsidiaries (if any) taken as a whole in one transaction
or a series of related transactions.
"COMPANY" means Mariner Energy, Inc., a Delaware corporation.
"COMPANY GROUP" means any or all of Company or any of its
affiliates, Hardy Oil & Gas plc or any of its affiliates, Joint
Energy Development Investments Limited Partnership or any of its
affiliates, Enron Capital & Trade Resources Corp. or any of its
affiliates, and any and all other persons paying
introduction/placement fees to Joint Energy Development
Investments Limited Partnership or any of its affiliates or Enron
Capital & Trade Resources Corp. or any of its affiliates for
access to one or more Working Interests of Company.
"COMPANY'S WORKING INTEREST" and "WORKING INTEREST OF COMPANY"
mean, with respect to any Prospect, the Working Interest in such
Prospect acquired by Company and, for purposes of this paragraph
9, shall include each portion thereof that Company may
subsequently transfer to another member of Company Group or to
any other person.
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"CONTROL" means (a) holding, directly or indirectly, more than 50
percent of the outstanding voting securities of a non-individual
person, (b) having the right, directly or indirectly, to more
than 50 percent of the profits of a non-individual person, (c)
having the right, directly or indirectly, to more than 50 percent
of the assets of a non-individual person if it is dissolved or
(d) having the contractual power to designate more than 50
percent of the directors (or individuals exercising similar
functions) of a non-individual person.
"DEVELOPMENT ACREAGE" means the acreage within a Prospect
covering a known or inferred geologic structure upon which
Company and/or its joint working interest owners or a farmee of
Company's Working Interest in a Prospect have drilled a well
capable of commercial oil and/or gas production. Such acreage
shall be deemed to be Development Acreage from the surface of the
earth down through the deepest known productive horizon. The
committee described in paragraph 9.5.1(a), below, shall designate
acreage within a Prospect as Development Acreage based upon the
most current interpretation available at the time of designation.
"EFFECTIVE DATE" means the effective date of this amended and
restated Employment Agreement.
"EXPLORATION AND DEVELOPMENT COSTS" means, with respect to any
Prospect or Prospects, and without duplication, all direct,
capital costs actually incurred by Company Group in connection
with exploration and development of such Prospect or Prospects,
including, without limitation, all costs incurred in preparing
for drilling, drilling, testing, completing, equipping
(including, without limitation, installation of platforms,
facilities and pipelines and dry hole costs) and recompleting
▇▇▇▇▇, all geological and geophysical costs, and all leasehold
costs (including bonus, delay rentals and all other costs of
acquiring and maintaining in force the leases, or portions
thereof or undivided interests therein, included in such
Prospects). Exploration and Development Costs shall not include
lease operating expenses or general and administrative expenses
of the Company Group.
"EXPLORATORY ACREAGE" means the acreage comprising a Prospect
which has not been designated by the committee described in
paragraph 9.5.1(a), below, as either Development Acreage or a
Producing Property Acquisition. Exploratory Acreage shall not be
limited as to depth (except to the extent, if any, to which
Company's Working Interest therein is limited as to depth).
"FPF/TLP EXPLOITATION PROSPECT" means any Prospect containing a
hydrocarbon reservoir which (a) exhibits a sufficient likelihood
of such hydrocarbon reservoir being economic, based on
commercially producible shows of hydrocarbons in a well drilled
within such reservoir, together with other geological and
geophysical data and interpretations, such that
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Company in its reasonable judgment plans to develop such
reservoir, and (b) is reasonably expected by Company to be
exploited and/or developed by utilizing a floating production
facility and/or a tension leg platform.
"FPF/TLP EXPLORATION PROSPECT" means any Prospect (other than an
FPF/TLP Exploitation Prospect) with respect to which Company
reasonably expects to utilize a floating production facility
and/or a tension leg platform in connection with operations to be
conducted on such Prospect.
"INITIAL WELL" means, with respect to a Prospect, the first well
drilled on such Prospect in which Company participates as a
Working Interest owner or with respect to which Company retains
an overriding royalty or other interest in oil and gas production
from such well.
"MAJOR PROSPECT" means any FPF/TLP Exploration Prospect, FPF/TLP
Exploitation Prospect, Subsea Tieback Exploration Prospect or
Subsea Tieback Exploitation Prospect with respect to which the
total amount estimated by Company for Exploration and Development
Costs to be incurred by Company Group (i.e., net to Company
Group's interest) through the end of the primary development
period for the field comprising such Prospect exceeds $30
million.
"NET PROFIT SHARE LEASE" means an oil and gas lease which
provides for sharing between lessor and lessee of the net profits
or net proceeds, as defined in said lease, from the sale of oil
and/or gas produced therefrom.
"NEWCO" means Mariner Holdings, Inc., a Delaware corporation, or
its successors.
"OVERRIDING ROYALTY INTEREST" means an interest in gross
production of oil and gas under each oil and gas lease (or
portion thereof) included within a Prospect, which interest
(except as herein otherwise provided) shall be free of all costs
of acquisition, exploration, drilling, completing, equipping,
operating and developing any oil and gas produced from such
lease.
A "PARENT" of a specified person is another person that controls
such specified person directly or indirectly through one or more
intermediaries.
"PAYOUT" means, for each Initial Well and each subsequent well
drilled on a Prospect, the point in time at which the revenue to
Company or its assigns from its interest in oil and gas
production from such well (after deduction of Company's or its
assigns' prorata part of the burden of (i) all landowners'
royalties, overriding royalties, net profits interests,
production payments or other burdens upon, measured by or payable
out of such production and (ii) all applicable ad valorem,
production, severance, sales, gathering, windfall profits excise
and similar taxes) equals the sum incurred by or for the account
of Company or its assigns
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(x) in preparing for drilling, drilling, testing, completing,
equipping (including, without limitation, installation of
platforms, facilities and pipelines), operating, reworking and
recompleting the well, and marketing the production therefrom,
and (y) for such well's allocable share of geological and
geophysical costs, leasehold costs and other common costs.
"Leasehold costs" shall mean payments for bonus, delay rentals,
and all other costs of acquiring from the landowners (or, in the
case of an acquisition by Company (but not any assignee of
Company), from predecessors in title to such leases) and
maintaining in force the leases allocated to the well. Leases
"allocated" to a well shall mean the leases or portions thereof
or undivided interests therein to which production from a well is
attributed, whether on a lease or unit basis. With respect to
each such well, "common costs" shall mean capital costs that are
attributable to (a) such Prospect as a whole or (b) such well and
one or more other ▇▇▇▇▇ (but not all ▇▇▇▇▇) on such Prospect and
shall include, without limitation, costs of drilling, plugging
and abandoning non-productive ▇▇▇▇▇ on such Prospect. Each such
well's allocable share of common costs shall be determined by
Company in any manner it deems appropriate from time to time.
The expression "2.5 TIMES PAYOUT" means, for each Initial Well
and each subsequent well drilled on a Prospect, the point in time
at which such revenue to Company or its assigns from its interest
in oil and gas production from such well, after such deductions
mentioned above, equals the product of 2.5 times the sum incurred
by or for the account of Company or its assigns (x) in preparing
for drilling, drilling, testing, completing, equipping,
operating, reworking and recompleting the well, and marketing the
production therefrom, and (y) for such well's allocable share of
geological and geophysical costs, leasehold costs and other
common costs as mentioned above.
A "PERSON" is an individual, a corporation, a trust, a
partnership, a limited liability company, an association or any
other entity.
"PRODUCING PROPERTY ACQUISITION" means a lease or leases, or
portions thereof or undivided interests therein, acquired by
Company during the term or extended term of this Agreement
principally for the value of existing oil and gas production
thereon and further development of oil and gas reserves
considered proved under such lease or leases at the time of
acquisition. A Producing Property Acquisition shall include
acquisition of such leasehold interests even though Company may
have previously acquired interests in some or all of the same
leases as a Prospect acquisition (i.e., prior to the time such
leases were considered to contain proved oil and gas reserves).
Company may in its sole discretion designate a Producing Property
Acquisition in whole or in part as a Prospect.
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"PROSPECT" means the lease or leases, or portions thereof or
undivided interests therein, acquired by Company within the
United States and its coastal waters while Employee is employed
by Company and during the term or extended term of this Agreement
covering lands which in the sole opinion of Company may contain
one or more hydrocarbon accumulations capable of being
commercially produced. For purposes of this definition of
Prospect, the acquisition of a lease or leases shall mean the
acquisition by Company of legal or beneficial rights or interests
in a lease or leases, including (without limitation) contractual
rights to acquire or earn a lease or leases (whether by farmout
agreement or otherwise, and whether such contractual rights are
subject to certain conditions such as the drilling or completion
of a commercial well, and without regard to the results of the
drilling or completion of any such well under such contract). A
Prospect shall not include a prospect acquired by Company by
merger or consolidation of Company with or into another entity
unless such prospect is so designated by Company. A Prospect
shall not include a Producing Property Acquisition unless such
Prospect is so designated by Company, and shall not include
leases included in a Prospect under previous Employee Incentive
Compensation Plans. All Prospects shall be deemed to be without
depth limitation unless the Company designates specified depths
only at the time said Prospect is initially acquired by Company.
Notwithstanding the date or dates on which leases in a Prospect
are actually acquired by Company, solely for purposes of
determining the employees of Company who are entitled to receive
an Overriding Royalty Interest therein, such leases, or portions
thereof or undivided interests therein, shall be deemed to have
been acquired by Company as of the date on which Company's
management approved such Prospect acquisition.
"SUBSEA TIEBACK EXPLOITATION PROSPECT" means any Prospect
containing a hydrocarbon reservoir which (a) exhibits a
sufficient likelihood of such hydrocarbon reservoir being
economic, based on commercially producible shows of hydrocarbons
in a well drilled within such reservoir, together with other
geological and geophysical data and interpretations, such that
Company in its reasonable judgment plans to develop such
reservoir, and (b) is reasonably expected by Company to be
exploited and/or developed by utilizing a subsea tieback system.
"SUBSEA TIEBACK EXPLORATION PROSPECT" means any Prospect (other
than a Subsea Tieback Exploitation Prospect) with respect to
which Company reasonably expects to utilize a subsea tieback
system in connection with operations to be conducted on such
Prospect.
A "SUBSIDIARY" of a specified person is an entity controlled by
such person directly or indirectly through one or more
intermediaries.
"VOTING STOCK" means shares of capital stock of the specified
entity the holders of which are entitled to vote for election of
directors thereof.
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"WORKING INTEREST" means the leasehold working interest, or
undivided interest therein, under an oil and gas lease which
obligates the owner thereof to bear his percentage of the costs
and expenses relating to the maintenance and development of, and
operations relating to, such lease and the well or ▇▇▇▇▇
associated therewith.
9.2 Employee's Property Interest.
Subject to the other provisions of this paragraph 9, Employee
shall own, be immediately vested with, and be entitled to receive
the benefits of an Overriding Royalty Interest equal to an
undivided percentage of Company's Working Interest, more
specifically described below, in each well on a Prospect and the
lease or leases allocated thereto, as follows:
EMPLOYEE: ▇▇▇▇▇ ▇. ▇▇▇▇
OVERRIDING ROYALTY INTEREST
IN
FPF/TLP EXPLORATION PROSPECTS,
FPF/TLP EXPLOITATION PROSPECTS,
SUBSEA TIEBACK EXPLORATION PROSPECTS
AND
SUBSEA TIEBACK EXPLOITATION PROSPECTS
GROUP TIME PERIOD BEFORE PAYOUT AFTER PAYOUT
----- ----------- ------------- ------------
Group XIX 12/2/96 and Thereafter 0.085937 0.343748
OVERRIDING ROYALTY INTEREST
IN
ALL OTHER PROSPECTS
GROUP TIME PERIOD BEFORE PAYOUT AFTER PAYOUT
----- ----------- ------------- ------------
Group XIX 12/2/96 and Thereafter 0.09375 0.37500
At 7:00 a.m. on the first day of the month following the month in
which Payout of such well occurs, the Overriding Royalty Interest
shall increase from the applicable before-Payout percentage to
the applicable after-Payout percentage. Except as herein
otherwise expressly provided, references in this paragraph 9 to
Employee's "Overriding Royalty Interest" with respect to any
Prospect shall mean the applicable before-Payout and after-Payout
percentages of Company's Working Interest in such Prospect as set
forth above.
9.3 Governmental Filings.
Company will assist Employee in Filing an 83b Election with the
Internal Revenue Service on each Prospect, on a prospect by
prospect or lease by lease basis, as the case may be, denoting
the transfer to Employee of the Overriding Royalty Interest and
stating the value of such interest for the purposes at the time
the interest is acquired.
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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9.4 Assignment of Overriding Royalty Interest.
Except as otherwise expressly provided in paragraphs 9.4.8 and
9.4.9, Employee shall not be entitled to obtain recordable
assignments of his interest under this paragraph 9 until his
completion of three years of employment by Company and, except as
otherwise expressly provided herein, Employee shall forfeit
ownership of such interest if Employee's employment is terminated
by Company pursuant to paragraph 3.5 or by Employee without Good
Reason as defined in paragraph 3.9, prior to the completion of
such three years of employment. Upon completion of three years
of employment of Employee by Company, Employee's ownership of
interests theretofore or thereafter transferred to him pursuant
to this Agreement will no longer be subject to forfeiture, and
assignments will be made in accordance with this paragraph 9.4.
Subject to the other provisions of this paragraph 9, Employee
shall be entitled to the revenue arising from his Overriding
Royalty Interest whether or not he is entitled to a recordable
assignment. Subject to the foregoing provisions of this
paragraph 9.4 and to the provisions of paragraph 9.5, as soon as
practicable after the end of each calendar quarter during the
term or extended term of this Agreement, Employee shall be
entitled to receive recordable assignments of his Overriding
Royalty Interest in a lease or leases (or portions thereof)
acquired by Company in a Prospect during such calendar quarter.
If Employee's employment is terminated by Company pursuant to
paragraph 3.5 or by Employee without Good Reason as defined in
paragraph 3.9, during any such calendar quarter, Employee shall
not be entitled to receive recordable assignments that would
otherwise have been due under this paragraph in respect of any
lease or leases (or portions thereof) acquired by Company in a
Prospect during such calendar quarter or thereafter (and Employee
shall not own, be vested with or be entitled to receive the
benefits of any Overriding Royalty Interest that would have been
granted by such recordable assignments) unless the termination is
at the end of the term or extended term of this Agreement. As
soon as practicable after the end of each such calendar quarter,
Company shall provide Employee with the following:
(a) A recordable assignment of his Overriding Royalty
Interest in the leases (or portions thereof)
acquired by Company in each Prospect during such
calendar quarter.
(b) A plat outlining the geographical limits of each
such Prospect. Company shall review each Prospect
plat each calendar quarter in light of drilling
activity on or near the Prospect, and expand the
plat boundary if new leases are acquired which
Company believes to contain a prospective
hydrocarbon accumulation that is located on the
same geological feature as such Prospect. Employee
shall be entitled to his Overriding Royalty
Interest in any lease acquired by Company within
the Prospect plat boundary
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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(and, to the extent provided in paragraph 9.7.2, in
any renewal, extension or new lease within the
Prospect plat boundary) for as long as such lease
within the boundary remains in effect.
9.4.1 Upon execution and delivery of such recordable assignment
to Employee, Company shall record the assignment.
9.4.2 If, prior to the drilling of the Initial Well on a
Prospect or thereafter, Company believes in good faith
that there is a substantial likelihood that it may be
necessary to exercise its discretion under paragraph 9.5
with respect to adjustment of Employee's Overriding
Royalty Interest in leases included within such Prospect,
Company may defer delivery of a recordable assignment of
Employee's Overriding Royalty Interest pending a
determination under paragraph 9.5.
9.4.3 Upon request by Company, Employee agrees to execute and
deliver any and all transfer orders, division orders and
other documents as may be necessary or appropriate to
cause all revenue attributable to his interest in a well
to be paid to Company on his behalf until delivery by
Company to Employee of a recordable assignment of his
interest in such well pursuant to this paragraph 9. In
such event, Company agrees promptly to process such funds
and pay all funds due Employee at the same time third
parties are paid revenue distributions from such well by
Company. After an assignment is delivered to Employee,
Company shall promptly give appropriate notice to the
disbursing entities in order to facilitate direct payment
to Employee of all revenue attributable to his interest in
such well.
9.4.4. Subject to the last sentence of this paragraph 9.4.4,
Company or its assigns shall quarterly perform Payout
calculations on each well which has not reached Payout in
every Prospect so that payments to Employee may be made on
a proper before payout/after payout basis on each well in
every Prospect. Company or its assigns shall prepare a
quarterly Payout statement for each well within each
Prospect and shall provide Employee a copy of said
quarterly Payout statements within ninety (90) days
following the end of the quarter. If Company or its
assigns fails to provide said quarterly Payout statements
for any such well(s) to at least five (5) employees
(whether or not such employees include the Employee) who
are entitled to receive an Overriding Royalty Interest in
such well(s) pursuant to this Agreement and/or other
employment agreements with Company for a period of four
(4) consecutive quarters, any such employee (including
without limitation, the Employee) may give Company written
notice of said failure. If Company or its assigns does
not provide the overdue quarterly
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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Payout statements to each employee entitled to same within
thirty (30) days following receipt of such notice, all
▇▇▇▇▇ within such Prospect which had previously been
considered before Payout pursuant to paragraph 9.2 shall
be deemed to be after Payout pursuant to paragraph 9.2 as
of the first day of the month following the month in which
the earliest delinquent quarterly Payout statement should
have been provided. When Payout status is reached on a
well, Company or its assigns shall deliver notice of such
event to Employee, the operator of such well and each
purchaser of production from such well and Company or its
assigns shall direct such operator or purchaser of
production (as appropriate) to disburse future revenues
attributable to Employee's and Company's respective
interests in such well on an after-Payout basis.
Notwithstanding the foregoing, if Employee's Overriding
Royalty Interest in any such well is adjusted pursuant to
any provisions of this paragraph 9 so as to be the same
percentage before and after Payout of such well, then the
provisions of this paragraph 9.4.4 shall no longer apply
from and after the date of such adjustment.
9.4.5 Should Employee be married or divorced at such time as
Employee earns the right to have an Overriding Royalty
Interest assigned to him hereunder, Company shall have no
obligation to make assignments to Employee's spouse/or
former spouse. Any division of community property shall
be the responsibility of Employee.
9.4.6 All interests assigned by Company to Employee shall be
subject to the terms, conditions and provisions of (a) any
joint operating agreement at any time theretofore or
thereafter entered into by Company or its assigns with
other Working Interest owners covering any of the leases
affected by the Overriding Royalty Interest herein
provided for, and (b) any farm-out or other agreements
under which Company acquires or may acquire its interest
in the leases; including, particularly, by way of
illustration and not by way of limitation, (i) any
provision of an applicable farm-out agreement requiring
reduction of Company's interest in the leases after
"payout" of an earning well or ▇▇▇▇▇ thereunder, in which
event Employee's Overriding Royalty in such leases shall
be proportionately reduced, and (ii) any provision
requiring forfeiture of interest for nonparticipation,
recoupment of multiple recovery costs and the like to the
extent that Company would forfeit its Working Interest for
nonparticipation either forever or until recoupment of
drilling and/or operating costs by the third parties
electing to participate, or such other like reason; and in
the event any such provisions come into effect, Employee's
Overriding Royalty in such leases shall be suspended until
such time, if ever, as such multiple recovery of costs by
the participating leasehold owners has been recovered or
such other cause for suspension is
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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17
removed and such Working Interest of Company is
reinstated, at which time Employee's Overriding Royalty
shall be so reinstated.
All interests assigned by Company to Employee shall be
subject to the terms, conditions and provisions of the
leases, any assignments and/or subleases thereof
theretofore made or agreed to be made by Company, and any
amendments or modifications of the leases, theretofore or
thereafter made, and Employee agrees that any such
amendments or modifications may be made without the
consent or joinder of Employee.
9.4.7 Company or its assigns shall not have the right to sell,
assign, farmout, convey or otherwise encumber Employee's
Overriding Royalty Interest, except as otherwise provided
in this paragraph 9.
9.4.8(a) Except as otherwise provided in the fifth
sentence of paragraph 9.4, and
notwithstanding anything (other than such
fifth sentence of paragraph 9.4) contained
herein to the contrary, if, after the
Effective Date and during the term or
extended term hereof, there shall have been
a Change in Control, then Employee shall be
entitled to receive recordable assignments
of his Overriding Royalty Interest, adjusted
in the manner described hereinbelow, in any
lease or leases (or portions thereof or
undivided interests therein) theretofore
acquired by Company and not yet assigned
during the term or extended term hereof and,
upon subsequent acquisition by Company, in
any lease or leases (or portions thereof or
undivided interests therein) thereafter
acquired by Company, in all Prospects
acquired by Company prior to such Change in
Control (without regard to whether or not
Employee has then completed three years of
employment by Company). Said Overriding
Royalty Interest shall be assigned in the
following manner:
Employee's after-Payout interest shall be
reduced to one-half of Employee's after-
Payout interest stated in paragraph 9.2 (as
such after-Payout interest stated in
paragraph 9.2 may have previously been
reduced pursuant to other provisions of this
paragraph 9) and Employee's before-Payout
interest shall be increased to twice
Employee's before-Payout interest stated in
paragraph 9.2 (as such before-Payout
interest stated in paragraph 9.2 may have
previously been reduced pursuant to other
provisions of this paragraph 9) with the
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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result that Employee's interests before and
after Payout shall be equal.
9.4.8(b) Except as otherwise provided in the fifth
sentence of paragraph 9.4, and
notwithstanding anything (other than such
fifth sentence of paragraph 9.4) contained
herein to the contrary, if, after the
Effective Date and during the term or
extended term hereof, the Company's Working
Interest in any Prospect is sold,
transferred or conveyed to the holder of any
indebtedness of the Company or of Newco or
of any parent or subsidiary of the Company
or Newco, or to any unaffiliated third
party, by or pursuant to a foreclosure of
any mortgage or other security interest
therein securing such indebtedness or any
part thereof or by transfer or conveyance in
lieu of such foreclosure, then Employee
shall be entitled to receive, prior to the
consummation of such sale, transfer or
conveyance, a recordable assignment of his
Overriding Royalty Interest, adjusted in the
manner described in paragraph 9.4.8(a), in
any lease or leases (or portions thereof or
undivided interests therein) theretofore
acquired by Company and not yet assigned
during the term or extended term hereof and,
upon subsequent acquisition by Company, in
any lease or leases (or portions thereof or
undivided interests therein) thereafter
acquired by Company, in all Prospects
acquired by Company prior to such sale,
transfer or conveyance (without regard to
whether or not Employee has then completed
three years of employment by Company).
9.4.9 Except as otherwise provided in the fifth sentence of
paragraph 9.4, and notwithstanding anything (other than
such fifth sentence of paragraph 9.4) contained herein to
the contrary, if, during the term or extended term hereof,
all or substantially all of the Company's Working
Interests in all or substantially all Exploratory Acreage
then owned by the Company are sold, transferred or
conveyed to an unaffiliated third party, then Employee
shall be entitled to receive, prior to the consummation of
such sale, transfer or conveyance, recordable assignments
of his Overriding Royalty Interest, adjusted in the manner
described in paragraph 9.4.8(a), in all leases (or
portions thereof or undivided interests therein) that
cover and include such Exploratory Acreage not yet
assigned during the term or extended term hereof (without
regard to whether or not Employee has then completed three
years of employment by Company).
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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9.5 Retained Company Discretion
9.5.1 Employee and Company recognize that in instances where all
or a portion of Company's Working Interest in a lease or
leases will be sold or farmed out to unaffiliated third
parties, Employee's Overriding Royalty Interest might in
some circumstances have a negative effect on the
marketability of Company's Working Interest to third
parties. In such cases, Company will in good faith
attempt to transfer Company's Working Interest subject to
Employee's Overriding Royalty Interest provided for in
this paragraph 9; provided, however, if, in Company's good
faith judgment, Company's Working Interest cannot be sold
or farmed out subject to Employee's Overriding Royalty
Interest, Company may elect to adjust Employee's
Overriding Royalty Interest as hereinafter provided.
9.5.1(a) The Board of Directors of Company shall
designate a committee of not less than three
individual persons employed by Company, at
least half of whom has been granted an
employee Overriding Royalty Interest by
Company, to exercise discretion on behalf of
Company in reducing or modifying, pursuant
to this paragraph 9.5.1 only, the Overriding
Royalty Interests provided for in this
paragraph 9; provided, however, that the
Board of Directors of the Company shall have
the right to designate a non-voting member
of such committee, who may be a director of
the Company or otherwise, and such member
shall have the right to participate in all
meetings of such committee (and shall
receive reasonable advance notice of any
such meetings) and shall be entitled to the
same information as is available to the
other members of the committee. Such
committee shall make all decisions under
this paragraph 9.5.1 subject to obtaining
the approval of the Board of Directors of
Company where such approval is required
under the provisions of this paragraph
9.5.1. Any decision made by the committee
shall require the approval of a majority of
the members of the committee. Any change to
this paragraph 9.5.1(a) shall require the
approval of the Board of Directors of the
Company and a majority of the Management
Directors (as that term is defined in the
Stockholders' Agreement dated April 2, 1996,
between Enron Capital & Trade Resources
Corp., Newco and certain employees of and
consultants to the Company, as it may be
amended from time to time) who became
stockholders pursuant to Section B.1 of that
agreement.
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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20
9.5.1(b) With respect to any Prospect on which no
initial Well has been drilled and no
assignments of Overriding Royalty Interests
have been made to Employee, the committee
may modify or reduce the Overriding Royalty
Interest of Employee in leases included
within such Prospect in any manner necessary
in the good faith judgment of the committee
to make an interest in such Prospect
saleable to any person not in Company Group;
provided, however, in connection with any
sale by Company of an interest in such
Prospect to any such person, Employee's
Overriding Royalty Interest shall be reduced
to zero unless the committee recommends a
lesser reduction and such recommendation is
approved by the Board of Directors of
Company. Such modification or reduction
shall apply only to the interest sold to
such a person, and shall not affect the
interest retained by the Company. Any
reduction or exercise of discretion by
Company under this paragraph shall be
applied proportionately to all participants
who are entitled to receive from Company an
Overriding Royalty Interest in leases
included within such Prospect.
9.5.1(c) With respect to any Prospect on which the
Initial Well has been drilled and which
Prospect has not been determined by Company
to be capable of producing oil and/or gas,
should Company desire to sell all or any
portion of its Working Interest in such
Prospect to unaffiliated third parties, the
committee may adjust the Overriding Royalty
Interest of Employee in leases included
within such Prospect in the following
manner:
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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Employee's after-Payout interest shall be
reduced to one-half of Employee's after-
Payout interest stated in paragraph 9.2 (as
such after-Payout interest stated in
paragraph 9.2 may have previously been
reduced pursuant to other provisions of this
paragraph 9) and Employee's before-Payout
interest shall be increased to twice
Employee's before-Payout interest stated in
paragraph 9.2 (as such before-Payout
interest stated in paragraph 9.2 may have
previously been reduced pursuant to other
provisions of this paragraph 9), with the
result that Employee's interests before and
after Payout shall be equal.
Such adjustment shall apply only to the
interest sold to unaffiliated third parties,
and shall not affect the interest retained
by Company. Any exercise of discretion by
Company under this paragraph shall be
applied in like manner to all participants
who are entitled to receive from Company an
Overriding Royalty Interest in leases
included within such Prospect.
Notwithstanding anything contained herein to
the contrary, if, after the Effective Date
and during the term or extended term hereof,
there shall have been a Change in Control,
then neither Company nor the person
acquiring the control shall have any right
to make the adjustment described above in
this paragraph 9.5.1(c).
Notwithstanding anything contained herein to
the contrary, if, after the Effective Date
and during the term or extended term hereof,
the Company's Working Interest in any
Prospect is sold, transferred or conveyed to
the holder of any indebtedness of the
Company or of Newco or of any parent or
subsidiary of the Company or Newco, or to
any unaffiliated third party, by or pursuant
to a foreclosure of any mortgage or other
security interest therein securing such
indebtedness or any part thereof or by
transfer or conveyance in lieu of such
foreclosure, then such holder or other third
party shall not have any right to make the
adjustment described above in this paragraph
9.5.1.(c).
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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9.5.1(d) With respect to any Prospect which has not
been determined by Company to be capable of
producing oil and/or gas, and regardless of
whether or not the Initial Well has been
drilled thereon, should Company desire to
farmout all or any portion of its Working
Interest in such Prospect to unaffiliated
third parties, the committee shall (unless
the committee recommends otherwise and the
Board of Directors approves such
recommendation) adjust the Overriding
Royalty Interest of Employee in leases
included within such Prospect in the
following manner:
Employee's Overriding Royalty Interest shall
be calculated by multiplying Employee's
percentage interests stated in paragraph 9.2
above (as such interests may have previously
been reduced pursuant to other provisions of
this paragraph 9) by Company's overriding
royalty interest set forth in the particular
farmout agreement for said Prospect, for and
during the period of time in which Company
receives such overriding royalty interest.
To the extent, if any, that Company's
overriding royalty interest set forth in
such farmout agreement converts to a Working
Interest in such Prospect (whether by
election of Company or otherwise), then,
from and after such conversion, Employee's
Overriding Royalty Interest shall be based
upon such Working Interest of Company
pursuant to paragraph 9.2 above; provided,
however, if pursuant to such farmout
agreement, only a portion of Company's
overriding royalty interest converts to a
Working Interest and Company retains,
following such conversion, some overriding
royalty interest in addition to such Working
Interest, Employee shall be entitled to
receive, as part of Employee's Overriding
Royalty Interest based upon Company's
Working Interest, an interest equal to the
percentage stated in paragraph 9.2 above (as
such interest may have previously been
reduced pursuant to other provisions of this
paragraph 9) multiplied by Company's
retained overriding royalty interest.
Such adjustment shall apply only to the
interest farmed out to unaffiliated third
parties, and shall not affect the interest
retained by Company. Any exercise of
discretion by Company under this paragraph
shall
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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23
be applied in like manner to all
participants who are entitled to receive
from Company an Overriding Royalty Interest
in leases included within such Prospect.
With respect to each well drilled on the
Prospect by a farmee of Company's Working
Interest and solely for the purpose of this
paragraph 9.5.1 (d), Payout shall be defined
as the point in time at which the revenue to
Company from its interest in oil and gas
production from such well (after deduction
of Company's prorata part of the burden of
(i) all landowners' royalties, overriding
royalties, net profits interests, production
payments or other burdens upon, measured by
or payable out of such production and (ii)
all applicable ad valorem, production,
severance, sales, gathering, windfall
profits excise and similar taxes) equals the
sum incurred by or for the account of
Company (x) in preparing for drilling,
drilling, testing, completing, equipping
(including, without limitation, installation
of platforms, facilities and pipelines),
operating, reworking and recompleting the
well, and marketing the production
therefrom, and (y) for such well's allocable
share of geological and geophysical costs,
leasehold costs, all other costs of
acquiring and maintaining in force the
leases allocated to the well and other
common costs. Leases "allocated" to a well
and "common costs" shall have the respective
meanings ascribed thereto in the definition
of "Payout" set forth in paragraph 9.1.
Notwithstanding anything contained herein to
the contrary, if, after the Effective Date
and during the term or extended term hereof,
there has been a Change in Control, then
neither Company nor the person acquiring the
control shall have any right to make the
adjustment described above in this paragraph
9.5.1(d).
Notwithstanding anything contained herein to
the contrary, if, after the Effective Date
and during the term or extended term hereof,
the Company's Working Interest in any
Prospect is sold, transferred or conveyed to
the holder of any indebtedness of the
Company or of Newco or of any parent or
subsidiary of the Company or Newco, or to
any unaffiliated third party, by or pursuant
to a foreclosure of any mortgage or other
security interest therein securing
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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24
such indebtedness or any part thereof or by
transfer or conveyance in lieu of such
foreclosure, then such holder or other third
party shall not have any right to make the
adjustment described above in this paragraph
9.5.1.(d).
9.5.1(e) With respect to any Prospect on which the
Initial Well has been drilled and which
Prospect has been determined by Company to
be capable of producing oil and/or gas,
should Company desire to sell or farmout all
or any portion of its Working Interest in
such Prospect to unaffiliated third parties,
the committee shall categorize geographical
areas of the leases comprising the Prospect
into Development Acreage and Exploratory
Acreage.
Any sale or farmout of the Company's Working
Interest in any such Development Acreage
will be made subject to Employee's
Overriding Royalty Interest provided for in
paragraph 9.2 hereinabove (as such interest
may have previously been adjusted pursuant
to other provisions of this paragraph 9);
provided, however, with respect to each well
drilled on the Prospect by a purchaser or
farmee or their assigns of Company's Working
Interest, and solely for the purpose of this
paragraph 9.5.1(e), Payout shall be defined
as the point in time at which the revenue to
purchaser or farmee or their assigns from
its or their interest purchased or farmed in
from Company in oil and/or gas production
from such well (after deduction of
purchaser's or farmee's prorata part of the
burden of (i) all landowners' royalties,
overriding royalties, net profits interests,
production payments or other burdens upon,
measured by or payable out of such
production and (ii) all applicable ad
valorem, production, severance, sales,
gathering, windfall profits excise and
similar taxes) equals the sum incurred by or
for the account of purchaser or farmee or
their assigns in preparing for drilling,
drilling, testing, completing, equipping,
operating, reworking and recompleting the
well, and marketing the production
therefrom.
With respect to the Company's Working
Interest in Exploratory Acreage to be sold
by Company, the committee may adjust the
Overriding Royalty Interest of Employee in
the following manner:
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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Employee's after-Payout interest shall be
reduced to one-half of Employee's after-
Payout interest stated in paragraph 9.2 (as
such after-Payout interest stated in
paragraph 9.2 may have previously been
reduced pursuant to other provisions of this
paragraph 9) and Employee's before-Payout
interest shall be increased to twice
Employee's before-Payout interest stated in
paragraph 9.2 (as such before-Payout
interest stated in paragraph 9.2 may have
previously been reduced pursuant to other
provisions of this paragraph 9), with the
result that Employee's interests before and
after Payout shall be equal.
With respect to the Company's Working
Interest in Exploratory Acreage to be farmed
out by Company, the committee shall (unless
the committee recommends otherwise and the
Board of Directors approves such
recommendation) adjust the Overriding
Royalty Interest of Employee in the
following manner:
Employee's Overriding Royalty Interest shall
be calculated by multiplying Employee's
percentage interests stated in paragraph 9.2
above (as such interests stated in paragraph
9.2 may have previously been reduced
pursuant to other provisions of this
paragraph 9) by Company's overriding royalty
interest set forth in the particular farmout
agreement for said Prospect, for and during
the period of time in which Company receives
such overriding royalty interest.
To the extent, if any, that Company's
overriding royalty interest set forth in
such farmout agreement converts to a Working
Interest in such Prospect (whether by
election of Company or otherwise), then,
from and after such conversion, Employee's
Overriding Royalty Interest shall be based
upon such Working Interest of Company
pursuant to paragraph 9.2 above; provided,
however, if pursuant to such farmout
agreement, only a portion of Company's
overriding royalty interest converts to a
Working Interest and Company retains,
following such conversion, some overriding
royalty interest in addition to such Working
Interest, Employee shall be
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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26
entitled to receive, as part of Employee's
Overriding Royalty Interest and in addition
to such Overriding Royalty Interest based
upon Company's Working Interest, an interest
equal to the percentage stated in paragraph
9.2 above (as such interest may have
previously been reduced pursuant to other
provisions of this paragraph 9) multiplied
by Company's retained overriding royalty
interest.
Such adjustment shall apply only to the
interest sold or farmed out to unaffiliated
third parties, and shall not affect the
interest retained by Company. Any exercise
of discretion by Company under this
paragraph shall be applied in like manner to
all participants who are entitled to receive
from Company an Overriding Royalty Interest
in leases included within such Prospect.
Notwithstanding anything contained herein to
the contrary, if, after the Effective Date
and during the term or extended term hereof,
there shall have been a Change in Control,
then neither Company nor the person
acquiring the control shall have any right
to make the adjustment described above in
this paragraph 9.5.1(e).
Notwithstanding anything contained herein to
the contrary, if, after the Effective Date
and during the term or extended term hereof,
the Company's Working Interest in any
Prospect is sold, transferred or conveyed to
the holder of any indebtedness of the
Company or of Newco or of any parent or
subsidiary of the Company or Newco, or to
any unaffiliated third party, by or pursuant
to a foreclosure of any mortgage or other
security interest therein securing such
indebtedness or any part thereof or by
transfer or conveyance in lieu of such
foreclosure, then such holder or other third
party shall not have any right to make the
adjustment described above in this paragraph
9.5.1.(e).
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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If any of the events set forth in the two
immediately preceding sentences hereof
should occur, such that the adjustment
described above in this paragraph 9.5.1(e)
with respect to the Overriding Royalty
Interest of Employee in leases in such
Exploratory Acreage is precluded from
occurring as provided above, then, with
respect to each well drilled on such
Exploratory Acreage by a purchaser or farmee
or their assigns of Company's Working
Interest, and solely for purposes of this
paragraph 9.5.1(e), Payout shall be defined
as set forth above in this paragraph
9.5.1(e).
9.5.2 Within sixty (60) days after the end of each fiscal year
of Company, Company may in its sole discretion elect to
reduce the Overriding Royalty Interest set forth in
paragraph 9.2 with respect to Prospects subject to this
Agreement that were acquired by Company during such fiscal
year (which election, if timely made as above provided,
shall be effective as of the beginning of such fiscal
year) based on actual Exploration and Development Costs
incurred by Company Group during such fiscal year in
respect of all Prospects subject to this Agreement, as
follows (with linear interpolation between indicated
levels of costs):
Total E & D
Costs Level Permitted Reduction
----------- -------------------
under $35 million no reduction
$70 million 25.00%
$105 million 33.33%
$140 million 38.33%
$175 million 41.67%
over $175 million **
** Permitted Reduction shall be determined in the sole discretion of
Company.
The total Exploration and Development Costs levels and
resultant ranges and escalation increments provided for
above are "Base Year" figures for fiscal year 1996-1997,
and shall be adjusted annually on a compound basis
beginning with the fiscal year commencing April 1, 1997,
according to the then current Council of Petroleum
Accountants Societies' (▇▇▇▇▇) adjustment rate (based upon
the percentage increase or decrease in the average weekly
earnings of Crude Petroleum and Gas Production Workers as
of April 1 as published by the United States Department of
Labor, Bureau of Labor Statistics).
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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The "Permitted Reduction" shall mean the percentage by
which Employee's Overriding Royalty Interest (both before
and after Payout) may be adjusted downward. Each such
adjustment shall determine Employee's Overriding Royalty
Interest for the fiscal year in question, and shall be
uniform on Prospects acquired during that period (subject
to paragraphs 9.5.1 and 9.5.3). Without limiting the
foregoing, a Permitted Reduction shall apply to any Major
Prospect subject to this Agreement that was acquired by
Company during such fiscal year, whether or not an
adjustment of Employee's Overriding Royalty Interest in
such Major Prospect shall have been made pursuant to
paragraph 9.5.3.
All leases acquired in those Prospects, whether during the
same fiscal year or thereafter, shall be subject to the
same Employee's Overriding Royalty Interest established at
the time the Prospect was acquired, subject, however, to
adjustment as provided for in this paragraph 9. A
Permitted Reduction in Employee's Overriding Royalty
Interest for a particular fiscal year, however, shall not
operate to reduce Employee's Overriding Royalty Interest
stated in paragraph 9.2 in respect of any Prospects
acquired by Company in any subsequent fiscal year during
the term or extended term hereof.
9.5.2(a) Notwithstanding the foregoing provisions of
this paragraph 9.5.2, with respect to any
FPF/TLP Exploitation Prospects acquired by
Company during a fiscal year of Company for
which Company's estimate of Exploration and
Development Costs incurred or to be incurred
by Company Group in respect of all FPF/TLP
Exploitation Prospects acquired in such
fiscal year exceeds $30 million through the
end of the respective primary development
periods for the fields comprising such
FPF/TLP Exploitation Prospects (which
periods, solely for purposes of the
adjustment provided for in this paragraph,
shall not exceed five (5) years), an
alternative calculation will be made prior
to determining the applicable "Permitted
Reduction" of Employee's Overriding Royalty
Interest with respect to such FPF/TLP
Exploitation Prospects. Such alternative
calculation shall be based upon the
assumptions that the total Exploration and
Development Costs to be incurred by Company
Group in respect of all such FPF/TLP
Exploitation Prospects will be incurred over
a two (2) year period and that such
Exploration and Development Costs will be in
addition to a "base level" of $70 million in
Exploration and Development Costs to be
incurred by Company
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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Group exclusive of the identified FPF/TLP
Exploitation Prospects. Such alternative
Exploration and Development Costs level (the
"alternative E & D Costs level") shall be
determined as follows:
The alternative E & D Costs level shall be
the sum of:
(i) One-half of Company's estimate of
Exploration and Development Costs
incurred or to be incurred by
Company Group through the end of the
respective primary development
periods in respect of all FPF/TLP
Exploitation Prospects acquired in
such fiscal year, plus
(ii) $70 million.
The Overriding Royalty Interest set forth in
paragraph 9.2 with respect to such FPF/TLP
Exploitation Prospects (both before and
after Payout) may, in Company's sole
discretion, be reduced by the greater of (x)
the "Permitted Reduction" percentage set
forth in the table above in this paragraph
for the actual "Total E & D Costs Level" for
such fiscal year and (y) the "Permitted
Reduction" percentage set forth in the table
above that would be applicable if the "Total
E & D Costs Level" for such fiscal year were
equal to such "alternative E & D Costs
level".
If the Overriding Royalty Interest set forth
in paragraph 9.2 with respect to such
FPF/TLP Exploitation Prospects, when reduced
pursuant to the foregoing provisions of this
paragraph, exceeds two-thirds of the
Overriding Royalty Interest set forth in
paragraph 9.2, Company may, in its sole
discretion, further reduce such Overriding
Royalty Interest to an interest equal to
two-thirds (before and after Payout,
respectively) of such Overriding Royalty
Interest set forth in paragraph 9.2.
Further, if the Overriding Royalty Interest
set forth in paragraph 9.2 with respect to
any such FPF/TLP Exploitation Prospect, when
reduced to such two-thirds level pursuant to
the foregoing provisions of this paragraph,
exceeds the Overriding Royalty Interest in
such Prospect that would result from
multiplying the Overriding Royalty Interest
percentage set forth in paragraph 9.2 times
a Working Interest percentage of 50% of
8/8ths, Company may, in its sole discretion,
further reduce such Overriding Royalty
Interest set forth in
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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paragraph 9.2 with respect to such FPF/TLP
Exploitation Prospect to a percentage
(before and after Payout, respectively)
that, when multiplied times Company's
Working Interest in such FPF/TLP
Exploitation Prospect, would equal the
Overriding Royalty Interest percentage
(before and after Payout, respectively) set
forth in paragraph 9.2 times a Working
Interest percentage of 50% of 8/8ths.
9.5.2(b) Notwithstanding the foregoing provisions of
this paragraph 9.5.2, with respect to any
Subsea Tieback Exploitation Prospects
acquired by Company during such fiscal year,
if the Overriding Royalty Interest set forth
in paragraph 9.2 with respect to such Subsea
Tieback Exploitation Prospects, when reduced
pursuant to the foregoing provisions of this
paragraph, exceeds the Overriding Royalty
Interest in such Prospect that would result
from multiplying the Overriding Royalty
Interest percentage set forth in paragraph
9.2 times a Working Interest percentage of
50% of 8/8ths, Company may, in its sole
discretion, further reduce such Overriding
Royalty Interest set forth in paragraph 9.2
with respect to such Subsea Tieback
Exploitation Prospect to a percentage
(before and after Payout, respectively)
that, when multiplied times Company's
Working Interest in such Subsea Tieback
Exploitation Prospect, would equal the
Overriding Royalty Interest percentage
(before and after Payout, respectively) set
forth in paragraph 9.2 times a Working
Interest percentage of 50% of 8/8ths.
9.5.2(c) Notwithstanding the foregoing provisions of
this paragraph 9.5.2, with respect to any
FPF/TLP Exploration Prospects acquired by
Company during such fiscal year, if the
Overriding Royalty Interest set forth in
paragraph 9.2 with respect to any such
FPF/TLP Exploration Prospects, when reduced
pursuant to the foregoing provisions of this
paragraph, exceeds two-thirds of the
Overriding Royalty Interest set forth in
paragraph 9.2, Company may, in its sole
discretion, further reduce such Overriding
Royalty Interest to an interest equal to
two-thirds (before and after Payout,
respectively) of such Overriding Royalty
Interest set forth in paragraph 9.2.
Further, if the Overriding Royalty Interest
set forth in paragraph 9.2 with respect to
any such FPF/TLP Exploration Prospect, when
reduced to such two-thirds level pursuant to
the foregoing
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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provisions of this paragraph, exceeds the
Overriding Royalty Interest in such Prospect
that would result from multiplying the
Overriding Royalty Interest percentage set
forth in paragraph 9.2 times a Working
Interest percentage of 50% of 8/8ths,
Company may, in its sole discretion, further
reduce such Overriding Royalty Interest set
forth in paragraph 9.2 with respect to such
FPF/TLP Exploration Prospect to a percentage
(before and after Payout, respectively)
that, when multiplied times Company's
Working Interest in such FPF/TLP Exploration
Prospect, would equal the Overriding Royalty
Interest percentage (before and after
Payout, respectively) set forth in paragraph
9.2 times a Working Interest percentage of
50% of 8/8ths.
9.5.2(d) Notwithstanding the foregoing provisions of
this paragraph 9.5.2, with respect to any
Subsea Tieback Exploration Prospects
acquired by Company during such fiscal year,
if the Overriding Royalty Interest set forth
in paragraph 9.2 with respect to any such
Subsea Tieback Exploration Prospects, when
reduced pursuant to the foregoing provisions
of this paragraph, exceeds the Overriding
Royalty Interest in such Prospect that would
result from multiplying the Overriding
Royalty Interest percentage set forth in
paragraph 9.2 times a Working Interest
percentage of 50% of 8/8ths, Company may, in
its sole discretion, further reduce such
Overriding Royalty Interest set forth in
paragraph 9.2 with respect to such Subsea
Tieback Exploration Prospect to a percentage
(before and after Payout, respectively)
that, when multiplied times Company's
Working Interest in such Subsea Tieback
Exploration Prospect, would equal the
Overriding Royalty Interest percentage
(before and after Payout, respectively) set
forth in paragraph 9.2 times a Working
Interest percentage of 50% of 8/8ths.
9.5.3 With respect to any Major Prospect, Company may in its
sole discretion elect to adjust the Overriding Royalty
Interest set forth in paragraph 9.2, effective as of the
date of Company's acquisition of such Major Prospect, as
follows:
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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Employee's before-Payout interest shall be reduced by the
following formula:
original before-Payout interest
------------------------------ = reduced before-Payout interest
X
-
Y
where "X" equals the total amount estimated by Company for
Exploration and Development Costs to be incurred by
Company Group in respect of such Major Prospect through
the end of the primary development period for the field
comprising such Major Prospect (which period, solely for
purposes of such adjustment calculation, shall not exceed
five (5) years), and
where "Y" equals $30 million.
Employee's after-Payout interest shall be increased by
adding thereto the full amount of the percentage interest
so deducted from Employee's before-Payout interest until
2.5 times Payout is reached, at which time Employee's
after-Payout interest shall be reduced by subtracting
therefrom the same percentage interest that was previously
added thereto pursuant to this sentence.
Such election may be made by Company whether or not
Employee's Overriding Royalty Interest in such Major
Prospect shall have been reduced pursuant to paragraph
9.5.2. In the case of any such prior reduction pursuant
to paragraph 9.5.2, the term "original before-Payout
interest" as used above in this paragraph shall refer to
Employee's before-Payout interest as previously reduced
pursuant to paragraph 9.5.2.
9.5.4 Notwithstanding anything contained herein to the contrary,
after an assignment is delivered to Employee with respect
to a Prospect pursuant to paragraph 9.4, Company or its
assigns may no longer reduce or modify Employee's
Overriding Royalty Interest on any well in such Prospect
without written consent of Employee, except pursuant to
paragraphs 9.5.1(c), 9.5.1(d), 9.5.1(e), 9.5.2 and 9.5.3
in the case only of assignments other than those delivered
pursuant to paragraphs 9.4.8(a), 9.4.8(b) and 9.4.9.
9.5.5 In no event may any party other than Company reduce or
modify Employee's Overriding Royalty Interest without
written consent of Employee.
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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9.5.6 Company shall give Employee written notice of any
adjustment made to Employee's Overriding Royalty Interest
pursuant to the provisions of paragraphs 9.5.1(b),
9.5.1(c), 9.5.1(d), 9.5.1(e), 9.5.2 and 9.5.3 within one
hundred twenty (120) days following such adjustment.
9.5.7 Upon request by Company, Employee shall execute and
deliver to Company such reassignments, transfer orders,
division orders, releases and other documents deemed by
Company to be necessary or appropriate to evidence any
modification, reduction or other adjustment pursuant to
this paragraph 9.5.
9.6 Company's Preferential Right to Purchase.
If at any time during the term or extended term of this
Agreement, or if within one (1) year from the expiration of this
Agreement, Employee receives and desires to accept an offer for
the purchase of a part or all of Employee's Overriding Royalty
Interest assigned pursuant to this paragraph 9 (the portion or
all of such Overriding Royalty Interest covered by such offer to
purchase being herein sometimes called the "Offered Interest"),
from a prospective third party purchaser who is ready, willing
and able to purchase the same, then Employee shall have the right
to sell such Offered Interest, but only after complying with the
following terms and provisions:
9.6.1 The offer shall first be reduced to writing and signed by
Employee and the offeror. Employee shall give Company
written notice of his receipt of, and his desire to
accept, such written offer, together with a copy of such
written offer signed by the prospective third party
purchaser and containing all of the terms and conditions
of such offer. The date such written notice is given to
Company is herein sometimes called the "Original Date."
9.6.2 Company shall thereafter have an option to purchase the
Offered Interest upon the same terms set forth in said
offer, which option may be exercised by written notice
thereof given to Employee within ten (10) days after the
Original Date.
9.6.3 If the Offered Interest is not purchased by Company
pursuant to the foregoing provisions of this paragraph,
then Employee shall have the right to sell the Offered
Interest to the prospective third party purchaser named in
such offer, provided that such sale is consummated within
thirty (30) days from the expiration date of the option of
Company created hereby and provided that such sale is made
in strict conformity with the terms of such offer.
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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34
9.6.4 If, however, such sale of the Offered Interest does not
occur within such thirty-day period for the price and upon
the terms set forth in such offer, then any sale of part
or all of such Offered Interest thereafter shall again be
subject to the option to purchase granted to Company under
this paragraph 9.6.
9.6.5 If Employee elects to take title to an Overriding Royalty
Interest in a legal entity other than himself (which he
may do only with Company's consent), such entity shall
take title subject to all of the terms and conditions of
this Agreement.
9.7 Additional Provisions Affecting Overriding Royalty
Interest.
In addition to the other provisions of this paragraph 9,
Employee's Overriding Royalty Interest shall be subject to the
following:
9.7.1 Notwithstanding anything to the contrary contained herein,
Employee shall not have the right to take in kind or
separately dispose of the production of oil and gas
attributable to his Overriding Royalty Interest.
9.7.2 Employee's Overriding Royalty Interest shall also apply to
the production of oil and gas under the terms and
provisions of any renewal, extension or new lease, to the
extent such renewal, extension or new lease covers all or
any portion of any lands covered by the expired lease
which was subject to Employee's Overriding Royalty
Interest or is within the Prospect plat, and provided,
however, that any such renewal, extension or new lease
shall have been acquired by or for the benefit of Company,
either prior to or within one (1) year after the
expiration of the expired lease.
9.7.3 Except as otherwise provided in this paragraph 9, in no
event shall Employee ever be liable or responsible in any
way for payment of any part of any exploration, drilling
or production costs or liabilities incurred by Company or
its assigns or other lessees attributable to the lease or
leases in a Prospect or to the production therefrom, it
being the intent of the parties that Employee's Overriding
Royalty Interest shall constitute a non-participating
royalty interest for all purposes.
9.7.4 Company will conduct and carry on the development,
maintenance and operation of any lease subject to
Employee's Overriding Royalty Interest in a manner which
it deems in its sole judgment to be reasonable and prudent
and in accordance with good oil and gas field practices,
and it will drill such ▇▇▇▇▇ as it deems proper in its
sole judgment from time to time in order to protect such
lease from drainage; provided, however, (a) nothing
herein contained
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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35
shall obligate Company to conduct any drilling operations
whatsoever upon such lease, or to continue to operate any
well or to operate or maintain in force or attempt to
maintain in force such lease by payment of delay rentals,
compensatory royalties or other payments or by the
drilling of any ▇▇▇▇▇ upon said lease, or in any other
manner, and the extent and duration of all operations, as
well as the preservation of each of such leases by delay
rental payments or otherwise, shall be solely at the will
of Company, and (b) Company shall have the right at any
time to surrender, abandon or otherwise terminate any such
lease in whole or in part without liability to Employee.
9.7.5 Company shall have the right to sell all production
attributable to Employee's Overriding Royalty Interest on
the same basis upon which the production attributable to
Company's interest in the same production is sold, and
shall account to Employee on that basis. In no event
shall Employee be entitled to receive payments for
production attributable to his Overriding Royalty Interest
calculated on a basis higher than that upon which
Company's interest in the same production is calculated or
computed on a higher price than that payable to Company on
account of production attributable to its interest, and in
no event shall Employee be entitled to receive payments on
amounts suspended by purchasers of the production pending
determination of the authorized price by governmental
entities. However, if Company sells any such production
to an affiliate of Company, the price therefor shall not
be less than would have been reasonably obtainable in a
sale to a non-affiliated purchaser.
9.7.6 There shall be deducted from the production, before
Employee's Overriding Royalty Interest is computed, any
production lost in the production from the leases, or any
lands pooled therewith, or used for drilling, operating,
development or production or in plant operations
(including gas injection, secondary recovery, pressure
maintenance, repressuring, cycling operations, plant fuel
or shrinkage) conducted for the purpose of producing or
processing production from lands covered by the leases or
from any lands pooled with the leases.
9.7.7 Company shall have the right and option, but not the
obligation, to process gas produced and saved from the
leases. If Company elects to process or have processed,
such gas in a gas processing plant or other facility,
whether or not owned by Company, then in such event
Employee shall be paid his percentage share provided for
herein of the proceeds of sale of all gasoline or other
liquid hydrocarbons or other products manufactured or
extracted from such gas as a result of such processing
(collectively, the "Products"), less the costs of
extraction or manufacture (which may consist of
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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36
a portion of the Products). Company shall also pay to
Employee the same percentage share of the proceeds of sale
of all residue gas sold by Company, less expenses incurred
by Company in transporting any such gas to point of
delivery and for dehydration and/or compression of gas at
or prior to such delivery and other expenses and fees
typically borne by royalty owners (excluding expenses or
fees for capital projects funded by Company to the extent
such expenses or fees have been included in the Payout
calculation for the well from which such gas is produced).
9.7.8 Employee's Overriding Royalty Interest shall bear its
proportionate share of all other costs of marketing and
transporting production from the leases or from any lands
pooled therewith which are typically borne by royalty
owners (excluding expenses or fees for capital projects
funded by Company to the extent such expenses or fees have
been included in the Payout calculation for the well from
which such production is produced).
9.7.9 Employee's Overriding Royalty Interest shall also bear its
share of all ad valorem, production, severance, sales,
gathering and other taxes typically borne by royalty
owners (whether state, federal or otherwise) assessed or
levied on or in connection with the Overriding Royalty
Interest or the production from the leases.
9.7.10 Company or its assigns shall have the right and power,
without any approval by Employee, to pool or unitize any
lease which is subject to Employee's Overriding Royalty
Interest, and to alter, change, amend or terminate any
pooling or unitization agreements heretofore or hereafter
entered into, as to all or any part of a Prospect, as to
any one or more of the formations or horizons thereunder,
upon such terms and provisions as Company shall in its
sole discretion determine. If and whenever through the
exercise of such right and power, or pursuant to any law
now existing or hereafter enacted, or any rule, regulation
or order of any governmental body now or hereafter
promulgated, any of the leases of Company are pooled or
unitized in any manner, Employee's Overriding Royalty
Interest shall also be pooled and unitized, and in such
event Employee's Overriding Royalty shall only be paid on
that portion of the production from the unit or units so
pooled, which is attributable to said leases under and by
virtue of the pooling and unitization.
9.7.11 Company may withhold payment to Employee of any funds
attributable to Employee's Overriding Royalty Interest
which Company, in its sole discretion, deems to be subject
to a risk of refund or recoupment pursuant to any rule,
regulation or order of any governmental authority or any
adverse claims by third parties.
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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During such suspense period, Employee shall not be
entitled to interest on sums so withheld.
9.7.12 In the event Company's Working Interest in any lease in
which Employee is entitled to an Overriding Royalty
Interest covers less than all of the full and entire
undivided interest in and to the land described therein,
and in and to all the oil and gas rights relating thereto,
then in that event the Overriding Royalty Interest as to
that portion of the leased premises in which Company's
Working Interest in such lease does not cover such full
and entire undivided interest shall be reduced
proportionately (i.e., in the proportion that the
undivided interest in and to said land and oil and gas
rights covered by such lease bears to such full and entire
undivided interest).
9.7.13 Notwithstanding anything contained in this paragraph 9 to
the contrary, Employee's Overriding Royalty Interest in
any Net Profit Share Lease ("NPSL") shall be reduced at
the same time and in the same percentage as Company's net
revenue interest in said NPSL is reduced pursuant to the
provisions of said NPSL.
9.7.14 Company and Employee further undertake and agree promptly
to execute and deliver, upon request of either party, all
assignments, reassignments, transfer orders, division
orders, releases and any other documents as may be
necessary to implement this paragraph 9 or otherwise to
more fully assure to each party the rights and interests
of such party provided for in this paragraph 9.
10. Insurance.
10.1 Employee shall be eligible for participation in such
insurance programs as Company shall institute from time to
time covering medical and dental expenses and such life
and accidental death and dismemberment insurance programs
as Company shall institute from time to time. Payment of
premiums for such coverages shall be in accordance with
Company policy covering all employees as may be
established from time to time by Company. Employee shall
also be eligible for participation in such retirement,
pension, deferred compensation and other benefit programs
the Company shall initiate from time to time.
11. Outside Activities.
During the term or extended term of this Agreement, Employee
shall devote all of his working time, energy and talents to the
due discharge and performance of his duties hereunder, at the
direction and subject to the control of Company, and shall
perform such services and duties as shall reasonably be required
from him from time to time by Company.
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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38
Employee agrees that he will not knowingly become involved in a
conflict of interest with Company or its subsidiaries, or upon
discovery thereof, allow such a conflict to continue. Moreover,
Employee agrees to provide Company a statement of all other
directorships Employee holds, with a brief description of the
business activities of each organization. This statement shall
be provided on or before December 31 of each year. If, in the
opinion of Company, a conflict of interest exists between Company
(and its affiliates) and the organization in which the Employee
holds a directorship, Company can require Employee to resign the
outside directorship.
12. Right to Invest.
Nothing in this Agreement is intended or shall be construed to
limit Employee's right (i) to engage in passive personal
investments, including, but not limited to, holding as an
investment not more than five percent (5%) of any class of the
issued and outstanding and publicly traded (on a recognized
national or regional securities exchange or in the over-the-
counter market) capital stock or other securities of any
corporation or other entity that conducts activities that compete
with the business of Company or any affiliate of Company; or (ii)
to invest, individually or with others, in oil and gas prospects,
subject, however, in the case of oil and gas prospects to the
following conditions:
12.1 Company must have first had the right and opportunity to
purchase all of the interest in any prospect made
available to Employee, even if this would preclude
Employee's participation.
12.2 Company must have made known its election either to
participate in less than the full interest made available
to Employee and have no desire to acquire an additional
interest, or declined to participate at all in the
prospect. If Company elects to participate in less than
the full interest made available to Employee, Employee may
invest in the portion of such interest not acquired by
Company.
12.3 Employee must purchase his interest in the oil and gas
prospect on terms which are no more favorable than those
made available to Company.
13. Disability During Employment.
If Employee shall become unable to perform his duties by reason
of disability, he shall be entitled to receive, in addition to
any insurance benefits he may receive, all of his salary for the
first one (1) month of his disability, and one-half (1/2) of his
salary for the next three (3) months of disability. Periods of
disability shall not be cumulative so long as they are separated
by at least ninety (90) days of continuous service.
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
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The term "disability" shall mean disability which, in the opinion
of a doctor satisfactory to Company, renders Employee unable to
perform his duties hereunder as evidenced by such doctor's
certificate. The date disability commences shall be the date
Employee first absents himself from work during a continuous
period of disability.
14. Merger or Acquisition.
In the event Company should be acquired by or merged into another
company, by signature of Company's authorized representatives,
Company hereby agrees that this Employment Agreement shall be
binding upon Company, its successors and assigns, and shall be
disclosed to any party considering merger with, or acquisition
of, Company.
15. Arbitration.
15.1 If a dispute arises out of or related to this Agreement
and the dispute cannot be settled through direct
discussions, Company and Employee agree that they shall
first endeavor to settle the dispute in an amicable
fashion. If such efforts fail to resolve the dispute, the
dispute shall, except as otherwise provided in paragraph
19, be resolved as follows:
15.1.1 Except as provided in paragraph 15.1.2 below, any
and all claims, demands, cause of action, disputes,
controversies, and other matters in question
arising out of or relating to this Agreement, any
provision hereof, the alleged breach thereof, or in
any way relating to the subject matter of this
Agreement, involving Company, Employee, and/or
their respective representatives, even though some
or all of such claims allegedly are
extracontractual in nature, whether such claims
sound in contract, tort, or otherwise, at law or in
equity, under state or federal law, whether
provided by statute or the common law, for damages
or any other relief, shall be resolved by binding
arbitration pursuant to the Federal Arbitration Act
in accordance with the Commercial Arbitration Rules
then in effect with the American Arbitration
Association (the "AAA"). The arbitration
proceeding shall be conducted in Houston, Texas.
The arbitration may be initiated by either party by
providing to the other a written notice of
arbitration specifying the claims, and the parties
shall thereafter endeavor to agree on an
arbitrator. If within thirty (30) days of the
notice of initiation of the arbitration procedure,
the parties are unable to agree on an arbitrator,
the party requesting arbitration shall file
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a request with the AAA that the Houston, Texas
office of the AAA provide a list of potential
arbitrators to both parties. The parties shall
thereafter have sixty (60) days to select an
arbitrator from such list, with such selection to
be by mutual agreement. If the parties fail to
select an arbitrator within such time by mutual
agreement, then either party may request that the
Chief Judge of the U.S. District Court for the
Southern District of Texas appoint an arbitrator,
and any such appointment shall be binding. The
arbitrator, utilizing the Commercial Arbitration
Rules of the American Arbitration Association,
shall within 120 days of his or her selection,
resolve all disputes between the parties. There
shall be no transcript of the hearings before the
arbitrator. The arbitrator's decision shall be in
writing, but shall be as brief as possible. The
arbitrator shall not assign the reasons for his or
her decision. The arbitrator's decision shall be
final and non-appealable to the maximum extent
permitted by law. Judgment upon any award rendered
in any such arbitration proceeding may be entered
by any federal or state court having jurisdiction.
This agreement to arbitrate shall be enforceable in
either federal or state court. The enforcement of
this agreement to arbitrate and all procedural
aspects of this agreement to arbitrate, including
but not limited to, the construction and
interpretation of this agreement to arbitrate, the
issues subject to arbitration (i.e.,
arbitrability), the scope of the arbitrable issues,
allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct
of the arbitration, shall be governed by and
construed pursuant to the Federal Arbitration Act
and shall be decided by the arbitrator. In
deciding the substance of any such claims, the
arbitrator shall apply the substantive laws of the
State of Texas (excluding Texas choice-of-law
principles that might call for the application of
some other State's law); provided, however, it is
expressly agreed that the arbitrator shall have no
authority to award treble, exemplary, or punitive
damages under any circumstances regardless of
whether such damages may be available under Texas
law, the parties hereby waiving their right, if
any, to recover treble, exemplary, or punitive
damages in connection with any such claims.
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15.1.2 Notwithstanding the agreement to arbitrate
contained in paragraph 15.1.1 above, in the event
that either party wishes to seek a temporary
restraining order, a preliminary or temporary
injunction, or other injunctive relief in
connection with any or all such claims, demands,
cause of action, disputes, controversies, and other
matters in question arising out of or relating to
this Agreement, any provision hereof, the alleged
breach thereof, or in any way relating to the
subject matter of this Agreement, involving
Company, Employee, and/or their respective
representatives, including disputes arising out of
a breach or alleged breach of paragraph 4 or 16,
even though some or all of such claims allegedly
are extra-contractual in nature, whether such
claims sound in contract, tort, or otherwise, at
law or in equity, under state or federal law,
whether provided by statute or the common law, for
damages or any other relief, each party shall have
the right to pursue such injunctive relief in
court, rather than by arbitration. The parties
agree that such action for a temporary restraining
order, a preliminary or temporary injunction, or
other injunctive relief will be brought in the
State or federal courts residing in Houston, ▇▇▇▇▇▇
County, Texas.
15.2 The Company shall pay all costs and expenses of Company
and Employee (including, but not limited to, attorneys'
fees, the fees of the arbitrator and the AAA and any other
related costs) for any arbitration proceeding or legal
action; provided, however, that if in any such arbitration
proceeding or legal action, the arbitrator or court,
respectively, determines that Employee has prosecuted or
defended any issue in such proceeding or action in bad
faith, the arbitrator or court, respectively, may allocate
the portion of such costs and expenses relating to such
issue between the parties in any other manner deemed fair,
equitable and reasonable by the arbitrator or court,
respectively.
16. Noncompetition Obligations.
16.1 As part of the consideration for the compensation and
benefits to be paid to Employee hereunder, and as an
additional incentive for Company to enter into this
Agreement, Company and Employee agree to the non-
competition obligations hereunder. Employee will not,
directly or indirectly for Employee or for others:
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16.1.1 in any geographic area or market where Company or
any of its subsidiaries are conducting any business
as of the date of termination of the employment
relationship or have during the previous twelve
months conducted such business, engage in any
business competitive with any such business; or
16.1.2 in any geographic area or market where Employee
knew Company contemplated entering any business as
of the date of termination of the employment
relationship, but only if Company had, as of such
date, invested significant resources toward
entering into such business in such geographic area
or market, engage in any business competitive with
any such business;
16.1.3 render advice or services to, or otherwise assist,
any other person, association, or entity who is
engaged, directly or indirectly, in any business
competitive with Company's business within the
parameters described in paragraphs 16.1.1 and
16.1.2 above with respect to such competitive
business; or
16.1.4 induce any employee of Company or any of its
subsidiaries to terminate his or her employment
with Company or its subsidiaries, or hire or assist
in the hiring of any such employee by any person,
association, or entity not affiliated with Company.
These non-competition obligations shall commence upon the
date of execution of this Agreement and extend until the
earlier of (a) the expiration of the term of this
Agreement (or any extended term) or (b) six (6) months
after termination of the employment relationship;
provided, however, that notwithstanding anything contained
in this paragraph 16 to the contrary, such obligations
shall only apply after the termination of employment if
the termination of employment results from termination for
Cause by Company under paragraph 3.5 or voluntary
termination without Good Reason by Employee (it being
understood and agreed that termination of this Agreement
by Employee under paragraph 3.1 shall not, for purposes of
this paragraph 16, constitute voluntary termination
without Good Reason by Employee).
16.2 Employee understands that the foregoing restrictions may
limit Employee's ability to engage in certain businesses
anywhere in the world during the period provided for
above, but acknowledges that Employee will receive
sufficiently high renumeration and other benefits under
this Agreement to justify such restriction. Employee
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acknowledges that money damages would not be sufficient
remedy for any breach of this Article by Employee, and
Company shall be entitled to enforce the provisions of
this Agreement and/or to specific performances and
injunctive relief as remedies for such breach or any
threatened breach. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article, but shall
be in addition to all remedies available at law or in
equity to Company, including, without limitation, the
recovery of damages from Employee and Employee's agents
involved in such breach and remedies available to Company
pursuant to other agreements with Employee.
16.3 It is expressly understood and agreed that Company and
Employee consider the restrictions contained in this
paragraph 16 to be reasonable and necessary.
Nevertheless, if any of the aforesaid restrictions are
found by a court having jurisdiction to be unreasonable,
or overly broad as to geographic area or time, or
otherwise unenforceable, the parties intend for the
restrictions therein set forth to be modified by such
courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
17. Foreign Corrupt Practices Act.
Employee shall at all times comply with the United States Foreign
Corrupt Practices Act, generally codified in 15 USC 78 (FCPA), as
the FCPA may hereafter be amended, and/or its successor statutes.
If Employee pleads guilty to or nolo contendere or admits civil
or criminal liability under the FCPA, or if a court finds that
Employee committed an action resulting in any Company entity
having civil or criminal liability or responsibility under the
FCPA with knowledge of the activities giving rise to such
liability or knowledge of facts from which Employee should have
reasonably inferred the activities giving rise to liability had
occurred or were likely to occur, such action or finding shall
constitute Cause for termination by Company under paragraph 3.5
of this Agreement unless Company's Board of Directors determines
that the actions found to be in violation of the FCPA were taken
in good faith and in compliance with all applicable policies of
Company.
18. Survival.
The provisions of paragraphs 4 and 16 shall survive any
termination of the employment relationship and/or of this
Agreement for the periods stated therein. The provisions of
paragraph 15 relating to arbitration shall survive any
termination of the employment relationship between Employee and
Company and the termination of this Agreement. Amounts,
compensation, rights and benefits which Employee is entitled to
receive or have accrued to Employee under this Agreement or under
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any plan, program, arrangement, agreement or policy of or with
Company or any of its affiliates before, at or subsequent to the
termination of the employment relationship between Employee and
Company or the termination of this Agreement shall not be
superseded and shall survive any such termination.
19. Certain Additional Payments by Company.
19.1 Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that
any payment or distribution by Company or any of its
affiliates to or for the benefit of Employee, whether paid
or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise (any such payments or
distributions being individually referred to herein as a
"Payment," and any two or more of such payments or
distributions being referred to herein as "Payments"),
would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the
"Code") (such excise tax, together with any interest
thereon, any penalties, additions to tax, or additional
amounts with respect to such excise tax, and any interest
in respect of such penalties, additions to tax or
additional amounts, being collectively referred herein to
as the "Excise Tax"), then Employee shall be entitled to
receive an additional payment or payments (individually
referred to herein as a "Gross-Up Payment" and any two or
more of such additional payments being referred to herein
as "Gross-Up Payments") in an amount such that after
payment by Employee of all taxes (as defined in paragraph
19.11) imposed upon the Gross-Up Payment, Employee retains
an amount of such Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
19.2 Subject to the provisions of paragraph 19.3 through 19.11,
any determination (individually, a "Determination")
required to be made under this paragraph 19, including
whether a Gross-Up Payment is required and the amount of
such Gross-Up Payment, shall initially be made, at
Company's expense, by nationally recognized tax counsel
mutually acceptable to Company and Employee ("Tax
Counsel"). Tax Counsel shall provide detailed supporting
legal authorities, calculations, and documentation both to
Company and Employee within 15 business days of the
termination of Employee's employment, if applicable, or
such other time or times as is reasonably requested by
Company or Employee. If Tax Counsel makes the initial
Determination that no Excise Tax is payable by Employee
with respect to a Payment or Payments, it shall furnish
Employee with an opinion reasonably acceptable to Employee
that no Excise Tax will be imposed with respect to any
such Payment or Payments. Employee shall have the right
to dispute any Determination (a "Dispute") within 15
business days after delivery of Tax Counsel's opinion with
respect to such Determination. The
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Gross-Up Payment, if any, as determined pursuant to such
Determination shall be paid by Company to Employee within
five business days of Employee's receipt of such
Determination. The existence of a Dispute shall not in
any way affect Employee's right to receive the Gross-Up
Payment in accordance with such Determination. If there
is no Dispute, such Determination shall be binding, final
and conclusive upon Company and Employee, subject in all
respects, however, to the provisions of paragraph 19.3
through 19.11 below. As a result of the uncertainty in
the application of Sections 4999 and 280G of the Code, it
is possible that Gross-Up Payments (or portions thereof)
which will not have been made by Company should have been
made ("Underpayment"), and if upon any reasonable written
request from Employee or Company to Tax Counsel, or upon
Tax Counsel's own initiative, Tax Counsel, at Company's
expense, thereafter determines that Employee is required
to make a payment of any Excise Tax or any additional
Excise Tax, as the case may be, Tax Counsel shall, at
Company's expense, determine the amount of the
Underpayment that has occurred and any such Underpayment
shall be promptly paid by Company to Employee.
19.3 Company shall defend, hold harmless, and indemnify
Employee on a fully grossed-up after tax basis from and
against any and all claims, losses, liabilities,
obligations, damages, impositions, assessments, demands,
judgements, settlements, costs and expenses (including
reasonable attorneys', accountants', and experts' fees and
expenses) with respect to any tax liability of Employee
resulting from any Final Determination (as defined in
paragraph 19.10) that any Payment is subject to the Excise
Tax.
19.4 If a party hereto receives any written or oral
communication with respect to any question, adjustment,
assessment or pending or threatened audit, examination,
investigation or administrative, court or other proceeding
which, if pursued successfully, could result in or give
rise to a claim by Employee against Company under this
paragraph 19 ("Claim"), including, but not limited to, a
claim for indemnification of Employee by Company under
paragraph 19.3, then such party shall promptly notify the
other party hereto in writing of such Claim ("Tax Claim
Notice").
19.5 If a Claim is asserted against Employee ("Employee
Claim"), Employee shall take or cause to be taken such
action in connection with contesting such Employee Claim
as Company shall reasonably request in writing from time
to time, including the retention of counsel and experts as
are reasonably designated by Company (it being understood
and agreed by the parties hereto that the terms of any
such retention shall expressly provide that Company shall
be solely responsible for the payment of any and all fees
and
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disbursements of such counsel and any experts) and the
execution of powers of attorney, provided that:
19.5.1 within 30 calendar days after Company receives or
delivers, as the case may be, the Tax Claim Notice
relating to such Employee Claim (or such earlier
date that any payment of the taxes claimed is due
from Employee, but in no event sooner than five
calendar days after Company receives or delivers
such Tax Claim Notice), Company shall have notified
Employee in writing ("Election Notice") that
Company does not dispute its obligations
(including, but not limited to, its indemnity
obligations) under this Agreement and that Company
elects to contest, and to control the defense or
prosecution of, such Employee Claim at Company's
sole risk and sole cost and expense; and
19.5.2 Company shall have advanced to Employee on an
interest-free basis, the total amount of the tax
claimed in order for Employee, at Company's
request, to pay or cause to be paid the tax
claimed, file a claim for refund of such tax and,
subject to the provisions of the last sentence of
paragraph 19.7, ▇▇▇ for a refund of such tax if
such claim for refund is disallowed by the
appropriate taxing authority (it being understood
and agreed by the parties hereto that Company shall
only be entitled to ▇▇▇ for a refund and Company
shall not be entitled to initiate any proceeding
in, for example, United States Tax Court) and shall
indemnify and hold Employee harmless, on a fully
grossed-up after tax basis, from any tax imposed
with respect to such advance or with respect to any
imputed income with respect to such advance; and
19.5.3 Company shall reimburse Employee for any and all
costs and expenses resulting from any such request
by Company and shall indemnify and hold Employee
harmless, on fully grossed-up after-tax basis, from
any tax imposed as a result of such reimbursement.
19.6 Subject to the provisions of paragraph 19.5 hereof,
Company shall have the right to defend or prosecute, at
the sole cost, expense and risk of Company, such Employee
Claim by all appropriate proceedings, which proceedings
shall be defended or prosecuted diligently by Company to a
Final Determination; provided, however, that (i) Company
shall not, without Employee's prior written consent, enter
into any compromise or settlement of such
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Employee Claim that would adversely affect Employee, (ii)
any request from Company to Employee regarding any
extension of the statute of limitations relating to
assessment, payment, or collection of taxes for the
taxable year of Employee with respect to which the
contested issues involved in, and amount of, the Employee
Claim relate is limited solely to such contested issues
and amount, and (iii) Company's control of any contest or
proceeding shall be limited to issues with respect to the
Employee Claim and Employee shall be entitled to settle or
contest, in his sole and absolute discretion, any other
issue raised by the Internal Revenue Service or any other
taxing authority. So long as Company is diligently
defending or prosecuting such Employee Claim, Employee
shall provide or cause to be provided to Company any
information reasonably requested by Company that relates
to such Employee Claim, and shall otherwise cooperate with
Company and its representatives in good faith in order to
contest effectively such Employee Claim. Company shall
keep Employee informed of all developments and events
relating to any such Employee Claim (including, without
limitation, providing to Employee copies of all written
materials pertaining to any such Employee Claim), and
Employee or his authorized representatives shall be
entitled, at Employee's expense, to participate in all
conferences, meetings and proceedings relating to any such
Employee Claim.
19.7 If, after actual receipt by Employee of an amount of a tax
claimed (pursuant to an Employee Claim) that has been
advanced by Company pursuant to paragraph 19.5.2 hereof,
the extent of the liability of Company hereunder with
respect to such tax claimed has been established by a
Final Determination, Employee shall promptly pay or cause
to be paid to Company any refund actually received by, or
actually credited to, Employee with respect to such tax
(together with any interest paid or credited thereon by
the taxing authority and any recovery of legal fees from
such taxing authority related thereto), except to the
extent that any amounts are then due and payable by
Company to Employee, whether under the provisions of this
Agreement or otherwise. If, after the receipt by Employee
of an amount advanced by Company pursuant to paragraph
19.5.2, a determination is made by the Internal Revenue
Service or other appropriate taxing authority that
Employee shall not be entitled to any refund with respect
to such tax claimed and Company does not notify Employee
in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of
any Gross-Up Payments and other payments required to be
paid hereunder.
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19.8 With respect to any Employee Claim, if Company fails to
deliver an Election Notice to Employee within the period
provided in paragraph 19.5.1 hereof or, after delivery of
such Election Notice, Company fails to comply with the
provisions of paragraph 19.5.2, 19.5.3 or 19.6 hereof,
then Employee shall at any time thereafter have the right
(but not the obligation), at his election and in his sole
and absolute discretion, to defend or prosecute, at the
sole cost, expense and risk of Company, such Employee
Claim. Employee shall have full control of such defense
or prosecution and such proceedings, including any
settlement or compromise thereof. If requested by
Employee, Company shall cooperate, and shall cause its
affiliates to cooperate, in good faith with Employee and
his authorized representatives in order to contest
effectively such Employee Claim. Company may attend, but
not participate in or control, any defense, prosecution,
settlement or compromise of any Employee Claim controlled
by Employee pursuant to this paragraph 19.8 and shall bear
its own costs and expenses with respect thereto. In the
case of any Employee Claim that is defended or prosecuted
by Employee, Employee shall, from time to time, be
entitled to current payment, on a fully grossed-up after
tax basis, from Company with respect to costs and expenses
incurred by Employee in connection with such defense or
prosecution.
19.9 In the case of any Employee Claim that is defended or
prosecuted to a Final Determination pursuant to the terms
of this paragraph 19.9, Company shall pay, on a fully
grossed-up after tax basis, to Employee in immediately
available funds the full amount of any taxes arising or
resulting from or incurred in connection with such
Employee Claim that have not theretofore been paid by
Company to Employee, together with the costs and expenses,
on a fully grossed-up after tax basis, incurred in
connection therewith that have not theretofore been paid
by Company to Employee, within ten calendar days after
such Final Determination. In the case of any Employee
Claim not covered by the preceding sentence, Company shall
pay, on a fully grossed-up after tax basis, to Employee in
immediately available funds the full amount of any taxes
arising or resulting from or incurred in connection with
such Employee Claim at least ten calendar days before the
date payment of such taxes is due from Employee, except
where payment of such taxes is sooner required under the
provisions of this paragraph 19.9, in which case payment
of such taxes (and payment, on a fully grossed-up after
tax basis, of any costs and expenses required to be paid
under this paragraph 19.9 shall be made within the time
and in the manner otherwise provided in this paragraph
19.9.
19.10 For purposes of this Agreement, the term "Final
Determination" shall mean (A) a decision, judgment, decree
or other order by a court or other tribunal with
appropriate jurisdiction, which has
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become final and non-appealable; (B) a final and binding
settlement or compromise with an administrative agency
with appropriate jurisdiction, including, but not limited
to, a closing agreement under Section 7121 of the Code;
(C) any disallowance of a claim for refund or credit in
respect to an overpayment of tax unless a suit is filed on
a timely basis; or (D) any final disposition by reason of
the expiration of all applicable statutes of limitations.
19.11 For purposes of this Agreement, the terms "tax" and
"taxes" mean any and all taxes of any kind whatsoever
(including, but not limited to, any and all Excise Taxes,
income taxes, and employment taxes), together with any
interest thereon, any penalties, additions to tax, or
additional amounts with respect to such taxes and any
interest in respect of such penalties, additions to tax,
or additional amounts.
20. No Obligation to Mitigate.
Employee shall not be required to mitigate the amount of any
payment or other benefit required to be paid to Employee pursuant
to this Agreement, whether by seeking other employment or
otherwise; nor shall the amount of any such payment or other
benefit be reduced on account of any compensation earned by
Employee as a result of employment by another person or entity.
21. Stock Purchase and Related Loan.
21.1 If (a) on or before June 2, 1997, no notice of an election
to terminate this Agreement under paragraph 3.1 has been
given by either party, and (b) before June 3, 1997,
neither Company nor Employee has otherwise terminated this
Agreement or Employee's employment with Company, then
Company shall, or shall cause Mariner Holdings, Inc. to,
grant Employee the opportunity to purchase from Mariner
Holdings, Inc. (the "stock purchase") no less than the
number of shares of the common stock of Mariner Holdings
Inc. ("Parent Common Stock") specified in a written notice
delivered by Company to Employee on or before June 16,
1997 (the "Minimum Share Specification"), and no more than
1,706 shares of Parent Common Stock (the "Maximum Share
Specification"), at a price of $100.00 per share which
shall be paid in cash. Employee's right to purchase such
shares of Parent Common Stock may be exercised any time
after June 16, 1997, and before June 30, 1997, by (x) the
execution and delivery by Employee to Company of written
notice in the form attached hereto as Exhibit A (the
"Notice") specifying the number of shares of Parent Common
Stock to be purchased by Employee, which number of shares
shall be no less than the Minimum Share Specification and
no more than the Maximum Share Specification, (y)
simultaneously with the execution and delivery of the
Notice,
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the execution and delivery by Employee and his spouse, if
any, to Company of an Addendum Agreement in the form
attached hereto as Exhibit B ("Addendum Agreement"), and
(z) the payment in cash within five (5) days after such
deliveries of the total purchase price for such shares;
provided, however, that notwithstanding anything contained
in this Agreement to the contrary, in the event Employee
does not, on or before June 30, 1997, exercise his right
to purchase, and within five (5) days thereafter purchase
for cash, all in the manner provided in this sentence, a
number of shares of Parent Common Stock equal to at least
the Minimum Share Specification, the initial term shall in
no event be deemed to have been extended for an additional
one and one-half (1 1/2) years through June 1, 1999, and
the initial term and the term of Employee's employment
under this Agreement shall expire on December 1, 1997.
21.2 In connection with the stock purchase, Employee shall be
entitled to receive a loan from Company for the purpose of
funding all or a portion of the stock purchase. The terms
and conditions with regard to such loan shall be evidenced
by a Promissory Note and a Security Agreement
substantially in the forms attached hereto as Exhibit C
and Exhibit D, respectively, which are incorporated herein
by reference and their terms and conditions shall be
considered a part of this Agreement.
22. Stock Options. As soon as practicable after Employee's purchase,
if any, of Parent Common Stock pursuant to paragraph 21, Company
shall, or shall cause Mariner Holdings Inc. to, grant to Employee
stock options for shares of Parent Common Stock pursuant to the
Mariner Holdings Inc. 1996 Stock Option Plan. The number of
shares of Parent Common Stock that Employee shall be entitled to
purchase pursuant to such options shall be the number of shares
of Parent Common Stock purchased by Employee pursuant to
paragraph 21 multiplied by 3.57; any fractional number of shares
shall be rounded to the nearest whole number as follows: a
fraction of .50 or more shall be rounded upward to the next whole
number, and a fraction of less than .50 shall be rounded down to
the next whole number. To the fullest extent possible, the
options granted to Employee shall be incentive stock options, and
otherwise shall be non-qualified stock options. The terms,
conditions and restrictions with regard to such stock options
shall be evidenced by an Incentive Stock Option Agreement (as to
the qualified stock options) and a Nonstatutory Stock Option
Agreement (as to be nonqualified stock options), substantially in
the forms attached hereto as Exhibit E and Exhibit F,
respectively, which shall be incorporated by reference and their
terms, conditions and restrictions shall be considered a part of
this Agreement.
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23. Acceleration Upon the Occurrence of an Initial Public Offering.
The provisions of paragraphs 21 and 22 notwithstanding,
Employee's right to purchase shares of Parent Common Stock under
paragraph 21 shall become immediately exercisable in full in the
manner provided in paragraph 21, but without regard to the
requirements relating to the Minimum Share Specification, and
upon the exercise of such right to purchase Parent Common Stock,
Employee shall immediately become entitled to be granted options
to purchase shares of Parent Common Stock under and in accordance
with paragraph 22, upon the occurrence on or before June 2, 1997,
of an "Initial Public Offering" (as such term is defined in
D.2(d) of the Stockholders' Agreement, dated April 2, 1996,
between Enron Capital & Trade Resources Corp., Mystery
Acquisition, Inc. (now know as Mariner Holdings, Inc.) and
certain other parties).
24. Stockholders' Agreement to Apply to Shares. No transfer or
issuance to Employee of any shares of Parent Common Stock shall
be effected unless Employee shall have simultaneously with or
prior to such transfer or issuance entered into an Addendum
Agreement with Mariner Holdings, Inc.
25. Miscellaneous.
25.1 This Agreement shall not be modified or amended except in
writing and signed by Company and Employee. This
Agreement shall be binding upon the heirs, administrators,
or executors and the successors and assigns of each party
to this Agreement.
25.2 The rights and benefits of Employee under the Agreement
are personal to him and shall not be assigned or
transferred without the prior written consent of Company.
Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and
their respective heirs, personal representatives,
successors and assigns.
25.3 All titles or headings of sections or paragraphs or other
divisions of this Agreement are only for the convenience
of the parties and shall not be construed to have any
effect or meaning with respect to the other content of
such sections or paragraphs or other divisions, such
content being controlling as to the agreement between the
parties hereto.
25.4 This Agreement is made and will be performed under, and
shall be governed by and construed in accordance with, the
law of the State of Texas.
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25.5 EMPLOYEE AFFIRMS AND ATTESTS BY HIS SIGNATURE TO THIS
AGREEMENT THAT HE HAS READ THIS AGREEMENT BEFORE SIGNING
IT AND THAT HE FULLY UNDERSTANDS ITS PURPOSES, TERMS AND
PROVISIONS, WHICH HE HEREBY EXPRESSLY ACKNOWLEDGED TO BE
REASONABLE IN ALL RESPECTS. EMPLOYEE FURTHER ACKNOWLEDGES
RECEIPT OF ONE COPY OF THIS AGREEMENT.
25.6 Notices contemplated under this Agreement shall be
directed to the following address:
If to Company:
Mariner Energy, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief Executive Officer
If to Employee:
▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Company and Employee may change the above addresses for
notice purposes by notifying the other in writing.
25.7 The Company may withhold from any amounts payable under
this Agreement such federal, state, or local taxes as
shall be required to be withheld pursuant to any
applicable law or regulation.
25.8 Except as otherwise expressly provided herein, nothing
contained in this Agreement shall limit or otherwise
affect any rights or benefits which are vested in, accrued
to, or earned by Employee, or for which Employee is
entitled to, prior to the Effective Date whether under the
Employment Agreement or otherwise.
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
-52-
53
Executed as of the Effective Date in duplicate originals at Houston,
Texas.
COMPANY:
MARINER ENERGY, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
Printed Title: President & Chief
Executive Officer
-----------------------
EMPLOYEE:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
EMPLOYMENT AGREEMENT - ▇▇▇▇▇ ▇. ▇▇▇▇
-53-
54
EXHIBIT A
_______________, 1997
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Mariner Energy, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
The undersigned hereby elects to purchase _______________________ shares
of the common stock, $.01 par value, of Mariner Holdings, Inc., a Delaware
corporation ("Mariner"), for a purchase price of $100 per share, pursuant to
that certain Employment Agreement entered into effective as of December 2,
1996, between Mariner Energy, Inc. and the undersigned (the "Employment
Agreement"). The undersigned has received a copy of, has read and understands
the provisions of that certain Stockholders' Agreement dated April 2, 1996,
among Enron Capital & Trade Resources Corp., a Delaware corporation, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ and Newco, as
amended (the "Stockholders' Agreement").
The undersigned agrees to be a party to the Stockholders' Agreement and
(together with the spouse of the undersigned, if applicable) has executed a
Addendum Agreement in the form attached to the Employment Agreement as an
exhibit and, concurrently with the delivery of this letter, is delivering an
executed Addendum Agreement to you.
Very truly yours,
▇▇▇▇▇ ▇. ▇▇▇▇
55
EXHIBIT B
ADDENDUM AGREEMENT
Addendum Agreement made this ______ day of _________________, _____ by
and between ▇▇▇▇▇ ▇. ▇▇▇▇ (the "New Stockholder") and Mariner Holdings, Inc., a
Delaware corporation (the "Company"), on behalf of the stockholders (the
"Stockholders") of the Company who are parties to that certain Stockholders'
Agreement dated April 2, 1996, between the Stockholders and the Company, as
amended (the "Agreement").
WHEREAS, the Stockholders entered into the Agreement to provide for
certain obligations and rights with respect to each of them and to the shares
of stock of the Company; and
WHEREAS, the New Stockholder wants to become a stockholder of the
Company; and
WHEREAS, the Stockholders have required in the Agreement that all
persons who are to acquire any shares of the Company's stock must enter into an
Addendum Agreement binding the New Stockholder to the Agreement to the same
extent as if the New Stockholder was an original party to the Agreement, to
promote the mutual interests of the Stockholders and the New Stockholder by
imposing the same restrictions and obligations on the New Stockholder and the
shares of the Company's stock to be acquired by the New Stockholder as were
imposed on the Stockholders under the Agreement;
NOW, THEREFORE, in consideration of the mutual promises of the parties
to this Addendum Agreement, and as a condition to the purchase of the shares of
stock of the Company, the New Stockholder acknowledges that the New Stockholder
has read the Agreement. The New Stockholder shall be bound by, and shall have
the benefit of, all the terms and conditions set out in the Agreement to the
same extent as if the New Stockholder was a "Stockholder" as defined in the
Agreement. This Addendum Agreement shall be attached to and become a part of
the Agreement.
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
56
[To be completed if applicable:]
The spouse of the New Stockholder is fully aware of, understands and
fully consents and agrees to the provisions of this Addendum Agreement and its
binding effect on any community property interests that the spouse may now or
hereafter own, and agrees that the termination of the spouse's marital
relationship for any reason shall not have the effect of removing any shares of
stock otherwise subject to this Addendum Agreement and the Agreement from the
coverage of this Addendum Agreement and the Agreement and that the spouse's
awareness, understanding, consent and agreement are evidenced by the spouse's
signing this Addendum Agreement.
-------------------------------------
Spouse
AGREED TO on behalf of the Stockholders pursuant to Section D.6 of the
Agreement.
MARINER HOLDINGS, INC.
By:
----------------------------------
Printed Name:
------------------------
Printed Title:
-----------------------
-2-
57
EXHIBIT C
PROMISSORY NOTE
$_________________ Houston, Texas ______________, 199__
1. FOR VALUE RECEIVED, the undersigned, ▇▇▇▇▇ ▇. ▇▇▇▇, an individual
residing at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Maker"), hereby
promises to pay to the order of Mariner Energy, Inc., a Delaware corporation
(the "Payee"), in Houston, ▇▇▇▇▇▇ County, Texas, at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, on or before [insert date 5 years from the
date of this Note] (the "Maturity Date"), in lawful money of the United States
of America, the principal amount of
____________________________________________ __________ AND ___/100 DOLLARS
($________________), together with interest on the unpaid balance of said
principal amount from time to time remaining outstanding, from the date hereof
until maturity (howsoever such maturity shall occur), in like money, at said
office, at a rate per annum equal to the lesser of (a) the Note Rate, and (b)
the Maximum Rate.
2. All past due principal of and interest on this Note shall bear
interest from the due date thereof (whether by acceleration or otherwise) until
paid at a per annum rate equal to the Maximum Rate.
3. Accrued unpaid interest on the outstanding principal balance
hereof shall be due and payable annually by Maker to Payee on the last Business
Day (as hereinafter defined) of each calendar quarter, commencing [insert last
Business Day of the calendar quarter that includes the date of this Note]. The
outstanding principal balance of this Note shall be due and payable on the
Maturity Date, upon which day all outstanding principal shall be immediately
due and payable. The foregoing notwithstanding, all unpaid accrued interest on
this Note, and the outstanding unpaid principal balance hereof, shall be
immediately due and payable in full upon the maturity of the principal of this
Note, whether by acceleration or otherwise.
4. Maker shall have the right and privilege of prepaying this Note,
in whole or in part, at any time or from time to time without premium or
penalty or notice to the holder hereof. All amounts prepaid shall be applied
first to earned, accrued and unpaid interest and the balance, if any, shall be
applied to the payment of the principal installments in inverse order of
maturity.
5. The terms set forth below shall have the meanings assigned to
such terms as used in this Note:
"Applicable Law" shall mean the law in effect from time to time
and applicable to the transactions between Payee and Maker pursuant to
this Note which lawfully permits the charging and collection of the
highest permissible lawful non-usurious rate of interest on such
transactions, including laws of the State of Texas, and to the extent
controlling and providing for a higher lawful rate of interest, laws of
the United States of
(Promissory Note - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
Initials for Identification
PAGE 1 OF 7 PAGES
58
America. It is intended that Article 1.04, Title 79, Revised Civil
Statutes of Texas, 1925, as amended, shall be included in the laws of
the State of Texas in determining Applicable Law; and for the purpose of
applying said Article 1.04, the interest ceiling applicable to such
transactions under said Article 1.04 shall be the indicated (weekly)
rate ceiling from time to time in effect.
"Business Day" shall mean any day on which banks are open for
general banking business in the State of Texas, other than on Saturday,
Sunday, a legal holiday or any other day on which banks in the State of
Texas are required or authorized by law or executive order to close.
"Maximum Rate" shall mean the maximum lawful non-usurious rate of
interest, if any, which under Applicable Law Payee is permitted to
charge Maker on the loan evidenced by this Note from time to time. If,
however, during any period interest accruing on this Note is not limited
to any maximum lawful non-usurious rate of interest under Applicable
Law, then during each such period the "Maximum Rate" shall be equal to a
per annum rate of 10% plus the Note Rate.
"Note Rate" shall mean, for each calendar quarter during the term
of this Note, a per annum rate of interest equal to one and one-quarter
percent (1 1/4%) plus the London Interbank Offered Rate ("LIBOR") for
the last month of such calendar quarter as reported in the Wall Street
Journal on the first Business Day of such calendar quarter.
6. If any one of the following events shall occur and be continuing
(an "Event of Default"):
(a) Maker shall fail to pay timely when due, the principal of,
or accrued unpaid interest on, this Note or any other of the obligations
hereunder; or
(b) Maker shall breach any representation or warranty made by
Maker in any statement furnished concurrently herewith or hereafter to
Payee by or on behalf of Maker; or
(c)(i) Default shall be made in the due observance or performance
of, or compliance with, any of the covenants or agreements contained
herein or (ii) the occurrence of any event or circumstance which
constitutes an "event of default" under any security agreement or other
instrument securing payment hereof; or
(d) Maker shall (i) die, resign from employment by Payee, be
disabled so as to be unable for more than three consecutive months to
(Promissory Note - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
Initials for Identification
PAGE 2 OF 7 PAGES
59
work full time in the employ of Payee, or shall no longer be employed by
Payee for any other reason (including, without limiting the generality
of the foregoing, termination of employment by Maker for cause or
without cause) as an officer of Payee, or (ii) apply for or consent to
the appointment of a receiver, trustee, custodian or liquidator of Maker
or of all or a substantial part of Maker's property, or (iii) generally
fail to pay Maker's debts as they come due in the ordinary course of
business, or (iv) commence, or file an answer admitting the material
allegations of or consenting to, or default in a petition filed against
it in, any case, proceeding or other action under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking to have an
order for relief entered with respect to Maker under the federal
Bankruptcy Code 11 USC Section 101 et. seq., or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, composition or the
similar relief with respect to Maker or Maker's debt; or
(e) A receiver, conservator, liquidator, custodian or trustee
of Maker or any of Maker's property is appointed by the order or decree
of any court or agency or supervisory authority having jurisdiction; or
Maker obtains an order for relief under the federal Bankruptcy Code 11
USC Section 101 et. seq.; or any of the property of Maker is sequestered
by court order; or a petition is filed or a proceeding is commenced
against Maker under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt or liquidation law of any jurisdiction,
whether now or hereafter in effect; or
(f)(i) Any event or condition occurs which results in, or permits
the forfeiture by Maker of Maker's material rights, benefits or
privileges under any indenture, mortgage, deed of trust, promissory
note, loan agreement, note agreement or any other material agreement or
undertaking, which continues unremedied for any applicable cure period;
or (ii) the occurrence of any event, circumstance, or condition which,
after any applicable cure or notice period or lapse of time, or both,
would constitute a default under any material agreement, contract,
promissory note, loan agreement, indenture, lien instrument or the like
to which Maker is a party or by which any of Maker's property is
subject, which continues unremedied for any applicable cure period,
whether or not a party thereto exercises any of its rights and remedies
with respect to such default; or
(g) The levy or execution of any attachment, execution or
other process against any material part of the collateral (if any)
securing this Note or any other material property or interest in
property of Maker,
(Promissory Note - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
Initials for Identification
PAGE 3 OF 7 PAGES
60
which is not timely and completely stayed by appropriate proceedings
and/or bonding requirements; or
(h) Any court shall find or rule, or Maker shall assert or
claim, (i) that Payee does not have a valid, perfected, enforceable lien
and security interest in the collateral (if any) securing this Note, or
(ii) that this Agreement or any of the loan documents executed in
connection herewith does not or will not constitute the legal, valid,
binding and enforceable obligations of the party or parties (as
applicable) thereto, or (iii) that any person has a conflicting or
adverse lien, claim or right in, or with respect to, the collateral (if
any) securing this Note or any material portion thereof; or
(i) The rendering of any judgment or judgments against Maker
for the payment of money in excess of $10,000, in the aggregate, which
remains unsatisfied and in effect for any period of 10 consecutive days
without a stay of execution; or
(j) Maker shall have concealed, removed, or permitted to be
concealed or removed, any part of Maker's property, with intent to
hinder, delay or defraud Maker's creditors or any of them, or made or
suffered a transfer of any of Maker's property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or shall
have made any transfer of Maker's property to or for the benefit of a
creditor at a time when other creditors similarly situated have not been
paid; or shall have suffered or permitted, while insolvent, any creditor
to obtain a lien upon any of Maker's property through legal proceedings
or distraint or other process which is not vacated within 10 days from
the date thereof; or
(k) Any material adverse change shall occur in the business,
assets or condition (financial or otherwise) of Maker; or
(l) Payee at any time shall, in Payee's sole and absolute
discretion, consider the payment of this Note to be insecure or any part
of the collateral (if any) securing this Note to be unsafe, insecure or
insufficient and Maker shall not upon demand by Payee furnish other
collateral or make payment, satisfactory to Payee;
then the Payee, at its option, may declare the unpaid principal portion of this
Note to be forthwith due and payable, whereupon the said portion of this Note
and all accrued, earned and unpaid interest shall become immediately due and
payable by Maker without demand, presentment for payment, notice of non-
payment, protest, notice of protest, notice of intent to accelerate maturity,
notice of acceleration of maturity or any other notice of any kind to Maker, or
any other person liable hereon or with respect hereto, all of which are hereby
expressly waived by Maker and each other person liable
(Promissory Note - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
Initials for Identification
PAGE 4 OF 7 PAGES
61
hereon or with respect hereto, anything contained herein or in any other
documents or instruments to the contrary notwithstanding; and upon the
happening of any Event of Default referred to in paragraphs (e) or (f), the
unpaid principal portion of this Note and all other interest on this Note then
accrued, earned and unpaid shall become automatically due and payable by Maker
without demand, presentment for payment, notice of nonpayment, protest, notice
of protest, notice of intent to accelerate maturity, notice of acceleration of
maturity or any other notice of any kind to Maker or any other person liable
hereon or with respect hereto, all of which are expressly waived by Maker and
each other Person liable hereon or with respect hereto, anything contained
herein or in any document or instrument to the contrary notwithstanding.
Further, upon the occurrence of any default or event of default, Payee shall
have all other rights and remedies as set forth herein and in the other
documents (if any) securing this Note and as otherwise provided at law or in
equity, all such rights and remedies being cumulative, including, but without
limitation, the right, without prior notice to Maker or any other person liable
with respect hereto, to set-off and apply any indebtedness at any time owing by
Payee to, or for the credit or account of, Maker against any indebtedness owed
to Payee by Maker, irrespective of whether or not Payee shall have made demand
under this Note or any other instrument securing this Note, and although this
Note may not then be matured; provided, that any exercise of said set-off by
Payee shall be subsequently followed by notice from Payee to Maker of such
right exercised, but the failure to give such notice shall in no manner affect
the right of Payee in respect to set-offs and corresponding applications of
funds.
7. Maker shall, upon demand by Payee, promptly pay to Payee any and
all costs and expenses, including legal expenses, collections costs and
attorneys' fees (whether or not legal proceedings are instituted including,
without limitation, legal expenses and reasonable attorneys' fees in connection
with any bankruptcy proceedings), incurred or paid by Payee in protecting or
enforcing Payee's rights hereunder. Without limiting the generality of the
foregoing, if this Note is collected by suit or through the Bankruptcy Court,
or any judicial proceeding, or if this Note is not paid at maturity, however
such maturity may be brought about, and it is placed in the hands of an
attorney for collection (whether or not legal proceedings are instituted), then
Maker agrees to pay, in addition to all other amounts owing hereunder, the
collection costs and reasonable attorneys' fees of the holder hereof.
8. The records of Payee shall constitute rebuttably presumptive
evidence of the principal and earned, accrued and unpaid interest remaining
outstanding on this Note.
9. It is the intent of Payee and Maker in the execution and
performance of this Note to remain in strict compliance with Applicable Law
from time to time in effect. In furtherance thereof, Payee and Maker stipulate
and agree that none of the terms and provisions contained in this Note shall
ever be construed to create a contract to pay for the use, forbearance or
detention of money with interest at a rate or in an amount in excess of the
Maximum Rate or amount of interest permitted to be charged
(Promissory Note - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
Initials for Identification
PAGE 5 OF 7 PAGES
62
under Applicable Law. For purposes of this Note "interest" shall include the
aggregate of all charges which constitute interest under Applicable Law that
are contracted for, charged, reserved, received or paid under this Note. Maker
shall never be required to pay unearned interest and shall never be required to
pay interest at a rate or in an amount in excess of the Maximum Rate or amount
of interest that may be lawfully charged under Applicable Law, and the
provisions of this paragraph shall control over all other provisions of this
Note, and of any other instrument pertaining to or securing this Note, which
may be in actual or apparent conflict herewith. If this Note is prepaid, or if
the maturity of this Note is accelerated for any reason, or if under any other
contingency the effective rate or amount of interest which would otherwise be
payable under this Note would exceed the Maximum Rate or amount of interest
Payee or any other holder of this Note is allowed by Applicable Law to charge,
contract for, take, reserve or receive, or in the event Payee or any holder of
this Note shall charge, contract for, take, reserve or receive monies that are
deemed to constitute interest which would, in the absence of this provision,
increase the effective rate or amount of interest payable under this Note to a
rate or amount in excess of that permitted to be charged, contracted for,
taken, reserved or received under Applicable Law then in effect, then the
principal amount of this Note or the amount of interest which would otherwise
be payable under this Note or both shall be reduced to the amount allowed under
Applicable Law as now or hereinafter construed by the courts having
jurisdiction, and all such moneys so charged, contracted for, taken, reserved
or received that are deemed to constitute interest in excess of the Maximum
Rate or amount of interest permitted by Applicable Law shall immediately be
returned to or credited to the account of Maker upon such determination. Payee
and Maker further stipulate and agree that, without limitation of the
foregoing, all calculations of the rate or amount of interest contracted for,
charged, taken, reserved or received under this Note which are made for the
purpose of determining whether such rate or amount exceeds the Maximum Rate or
amount, shall be made to the extent not prohibited by Applicable Law, by
amortizing, prorating, allocating and spreading during the period of the full
stated term of this Note, all interest at any time contracted for, charged,
taken, reserved or received from Maker or otherwise by Payee or any other
holder of this Note.
10. Maker and all sureties, endorsers and guarantors (if any) of this
Note waive demand, presentment for payment, notice of non-payment, protest,
notice of protest, notice of intent to accelerate maturity, notice of
acceleration of maturity and all other notice, filing of suit and diligence in
collecting this Note or enforcing any of the security herefor, and agree to any
substitution, exchange or release of any such security, the release of any
party primarily or secondarily liable hereon and further agree that it will not
be necessary for any holder hereof, in order to enforce payment of this Note,
to first institute suit or exhaust its remedies against any security herefor,
and consent to any one or more extensions or postponements of time of payment
of this Note on any terms or any other indulgences with respect hereto, without
notice thereof to any of them.
(Promissory Note - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
Initials for Identification
PAGE 6 OF 7 PAGES
63
11. This Note is secured by all security agreements, collateral
assignments and lien instruments (if any) executed by the Maker in favor of
Payee, or executed by any other party as security for this Note, including any
executed prior to, simultaneously with, or after the date of this Note [and
including, without limitation, security agreement(s) of even date herewith by
Maker in favor of Payee].
12. Maker hereby irrevocably directs Payee to apply and set off,
against the accrued unpaid interest hereon and the outstanding unpaid principal
balance hereof, all deferred compensation and other payments and amounts due
and payable from Payee to Maker on or after the date hereof. It is Maker's
intention hereby to convey, assign and transfer as of the date hereof to Payee,
for the purposes of effecting the foregoing application and set off, all of
Maker's rights to receive such deferred compensation after the date hereof,
such that when, as and if such deferred compensation payments shall be due and
payable by Payee to Maker, Maker shall be deemed to have irrevocably assigned
and transferred all rights thereto to Payee, effective as of the date hereof.
13. This Note shall be governed by and construed in accordance with
the internal laws of the State of Texas and applicable federal laws of the
United States of America. This Note has been delivered and accepted and is
payable at Houston, ▇▇▇▇▇▇ County, Texas. There are no unwritten or oral
agreements between the Maker and the Payee. Payee has no commitment to make
any additional loans to or to extend financial accommodations to Maker beyond
the loan evidenced hereby.
EXECUTED AND EFFECTIVE as of the day and year first above written.
MAKER:
-----
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
(Promissory Note - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
Initials for Identification
PAGE 7 OF 7 PAGES
64
EXHIBIT D
SECURITY AGREEMENT
__________ ___, 199__
I. Parties, Collateral, and Obligations
▇▇▇▇▇ ▇. ▇▇▇▇ (hereinafter called "Debtor"), whose address is
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, for valuable considerations, receipt
of which is hereby acknowledged, hereby grants to MARINER ENERGY, INC., a
Delaware corporation (hereinafter called "Secured Party"), whose address is a
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, a
security interest in the following property:
(i) all shares of capital stock of Mariner Holdings, Inc., a Delaware
corporation ("MHI"), now owned or hereafter acquired by Debtor
(including, but not limited to, all shares of MHI capital stock acquired
by Debtor with the proceeds of the Note (as hereinafter defined) and all
shares of MHI capital stock acquired by Debtor upon the exercise of any
stock options granted by MHI to Debtor); (ii) all of Debtor's rights and
interests in and under that certain Incentive Stock Option Agreement
dated ____________, 19__, between MHI and Debtor; (iii) all of Debtor's
rights and interests in and under that certain Nonstatutory Stock Option
Agreement dated ______________, 19__, between MHI and Debtor; (iv) all
of Debtor's rights and interests, whether now existing or hereafter
acquired or arising, to require any share of capital stock of MHI
(including, but not limited to, any rights of Debtor under any future
stock option agreements, stock option plans and stock incentive or
compensation plans or agreements); and (v) all of Debtor's rights, title
and interests in or in respect of, whether now existing or hereafter
acquired or arising in, any "Overriding Royalty Interest," as such term
is defined in that certain Employment Agreement dated effective as of
December 2, 1996 (the "Employment Agreement"), between Secured Party and
Debtor, and in any contractual or other rights to acquire or obtain, or
in respect of, any such Overriding Royalty Interest;
together with all proceeds, monies, income, investment property, revenues,
royalties, funds and benefits attributable or accruing to said property, which
Debtor is or may hereafter become entitled to receive on account of said
property, including, but not by way of limitation, all interest, premium,
redemption proceeds and other principal payments and all dividends and other
distributions on or with respect to capital stock whether payable in cash,
stock or other property and all subscription and other rights. In the event
that Debtor shall receive any of the foregoing, Debtor shall receive and hold
the same in trust for Secured Party and shall not commingle the same with other
monies or property, and Debtor shall promptly and immediately deliver same to
(Security Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
Initials for Identification
-1-
65
Secured Party. All property in which Secured Party is herein granted a
security interest is hereinafter called the "Collateral."
The security interest granted herein secures the payment of all
liabilities, indebtedness, and obligations of Debtor to Secured Party
(hereinafter called the "Obligations") arising under and evidenced by a
promissory note of even date herewith (hereafter called the "Note") executed by
Debtor in the principal amount of $___________, payable to the order of Secured
Party, and including costs and expenses and attorney's fees and legal expenses,
all in accordance with the terms of the Note and this Security Agreement, and
all renewals, extensions and rearrangements of the above Obligations. Unless
otherwise agreed, all of the Obligations shall be payable at the offices of
Secured Party in Houston, ▇▇▇▇▇▇ County, Texas.
II. Warranties, Covenants and Agreements of the Debtor Debtor
hereby warrants, covenants and agrees that:
(1) Except for the security interest granted hereby, Debtor is
the owner and holder of all the Collateral free from any adverse claim,
security interest, encumbrance, lien, charge or any other right, title, or
interest of any person other than Secured Party; Debtor has full power and
lawful authority to sell, transfer and assign the Collateral to Secured Party
and to grant to the Secured Party a first, prior and valid security interest
therein as herein provided; the execution and delivery and the performance
hereof are not in contravention of any indenture, agreement or undertaking to
which the Debtor is a party or by which the Debtor is bound.
(2)(a) Debtor has not heretofore signed any financing statement
or security agreement which covers any of the Collateral, and no such financing
statement or security agreement is now on file in any public office.
(b) As long as any amount remains unpaid on any of the
Obligations, (i) Debtor will not enter into or execute any security agreement
or any financing statement which covers any of the Collateral other than those
security agreements and financing statements in favor of Secured Party
hereunder, and further (ii) there will not be on file in any public office any
financing statement or statements (or any documents or papers filed as such)
which covers any of the Collateral other than financing statements in favor of
Secured Party hereunder.
(c) Debtor authorizes Secured Party to file, in jurisdictions
where this authorization will be given effect, a financing statement signed
only by Secured Party covering the Collateral. At the request of Secured
Party, Debtor will join Secured Party in executing such documents as Secured
Party may determine, from time to time, to be necessary or desirable under
provisions of the Uniform Commercial Code; without limiting the generality of
the foregoing, Debtor agrees to join Secured Party, at Secured Party's request,
in executing one or more financing statements in form satisfactory to Secured
Party, and Debtor will pay the cost of filing or recording the same, or of
filing
(Security Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
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or recording this Security Agreement, in all public offices at any time and
from time to time, whenever filing or recording of any such financing statement
or of this Security Agreement is deemed by Secured Party to be necessary or
desirable. In connection with the foregoing, it is agreed and understood
between the parties hereto (and Secured Party is hereby authorized to carry out
and implement the following agreements and understandings and Debtor hereby
agrees to pay the cost thereof) that Secured Party may, at any time or times,
file as a financing statement any counterpart, copy, or reproduction of this
Security Agreement signed by Debtor if Secured Party shall elect so to file,
and it is also agreed and understood that Secured Party may, if deemed
necessary or desirable, file (or sign and file) as a financing statement any
carbon copy of, or photographic or other reproduction of, this Security
Agreement or of any financing statement executed in connection with this
Security Agreement.
(3) Debtor will not sell or offer to sell or otherwise
transfer or encumber the Collateral or any interest therein without the written
consent of Secured Party; and Debtor will keep the Collateral free from any
adverse, lien, security interest, encumbrance, charges or claim.
(4) Except as specifically otherwise permitted or provided
herein, if, at any time, the Debtor holds or has possession of the Collateral
or any part thereof, or of any other goods, documents or instruments now or at
any time constituting a part of the Collateral subject to this Security
Agreement, then the same shall remain in Debtor's possession and control at all
times at Debtor's risk of loss, and, if in Debtor's possession, are now kept,
and at all times shall be kept, at the address given in the blank below:
or if left blank at the address first shown for Debtor at the beginning of this
Security Agreement; and in any event Debtor will promptly notify Secured Party
of any change in any of such addresses and of any new addresses where the
Collateral or any such goods, documents or instruments are or may be kept and
of any other change in the above-identified location of all or any part of the
Collateral, and Debtor will not move or remove the Collateral or such goods,
documents, or instruments, or any part thereof, from the addresses and places
described and specified above without the prior written consent of Secured
Party.
(5) All information supplied and statements made by Debtor in
any financial, credit or accounting statement or application for credit made or
delivered to Secured Party by or on behalf of Debtor prior to,
contemporaneously with or subsequent to the execution of this Security
Agreement are and shall be true, correct, complete, valid and genuine.
(6) Debtor will, upon the execution of this Security Agreement
by Debtor, deliver, or cause to be delivered, to Secured Party the instruments,
securities,
(Security Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
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documents, and chattel paper subject to this Security Agreement; furthermore,
if any instruments, securities, chattel paper, money or monies, or documents
are, at any time or times, included in the Collateral, whether as proceeds or
otherwise, Debtor will promptly deliver the same to Secured Party upon the
receipt thereof by Debtor, and in any event promptly upon demand therefor by
Secured Party. Notwithstanding anything contained in the Employment Agreement
to the contrary, as a condition precedent to Secured Party's obligations to
deliver to Debtor any recordable assignment of any Overriding Royalty Interest,
Debtor shall execute and deliver to Secured Party in recordable form and
otherwise in form and substance satisfactory to Secured Party a mortgage,
assignment of production and security agreement, and/or such other instruments
and/or documents as Secured Party shall determine, covering such Overriding
Royalty Interest and securing payment of the Obligations.
III. Events of Default
Debtor shall be in default under this Security Agreement upon the
happening of any of the following events or conditions (each an "Event of
Default"):
(1) Default in the payment when due of the principal of, or
interest on, the Note or of any other of the Obligations;
(2) Default in the performance of any agreement or obligation
of Debtor to the holder of the Obligations;
(3) Any warranty, representation or statement made in this
Security Agreement or made or furnished to Secured Party by or on behalf of
Debtor in connection with this Security Agreement or to induce Secured Party to
make any loan to Debtor proves to have been false in any material respect when
made or furnished; or any financial statement of Debtor or of any endorser,
guarantor or surety on any of the Obligations which has been or may be
furnished to Secured Party by or on behalf of Debtor or such guarantor,
endorser or surety shall prove to be false in any materially detrimental
respect;
(4) The levy of any attachment, execution, or other process
against Debtor or any of the Collateral;
(5) Death, insolvency or business failure of Debtor, or the
commission of any act of bankruptcy by, or the appointment of receiver or other
legal representative for any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceedings under any
bankruptcy or insolvency law by or against, Debtor;
(6) Failure or refusal of Debtor to perform or observe any of
the covenants, duties or agreements herein imposed upon or agreed to be
performed or observed by Debtor;
(Security Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
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(7) The occurrence of any "Event of Default" as such term is
defined in the Note.
IV. Remedies
(1) In the event of the default in the payment of any of the
Obligations or any principal, interest or other amount payable thereunder, when
due, or upon the happening of any of the Events of Default specified above, and
at any time thereafter, at the option of the holder thereof, any or all of the
Obligations shall become immediately due and payable without presentment or
demand or any notice to the Debtor or any other person obligated thereon and
Secured Party shall have and may exercise with reference to the Collateral and
Obligations any or all of the rights and remedies of a secured party under the
Uniform Commercial Code as adopted and as amended in the State of Texas, and as
otherwise granted herein or under any other law or under any other agreement
executed by Debtor, including, without limitation, the right and power to sell,
at public or private sale or sales, or otherwise dispose of or utilize the
Collateral and any part or parts thereof in any manner authorized or permitted
under said Uniform Commercial Code after default by a debtor, and to apply the
proceeds thereof toward payment of any costs and expenses and attorney's fees
and legal expenses thereby incurred by Secured Party and toward payment of the
Obligations in such order or manner as Secured Party may elect. To the extent
permitted by law, Debtor expressly waives any notice of sale or other
disposition of the Collateral and any other rights or remedies of Debtor or
formalities prescribed by law relative to sale or disposition of the Collateral
or exercise of any other right or remedy of Secured Party existing after
default hereunder; and to the extent any such notice is required and cannot be
waived, Debtor agrees that if such notice is mailed, postage prepaid, to Debtor
either at the street address first shown hereinabove or at the mailing address,
if any, shown for Debtor at the beginning of this Security Agreement at least
five days before the time of the sale or disposition, such notice shall be
deemed reasonable and shall fully satisfy any requirement for giving of notice.
(2) Secured Party is expressly granted the right, at its
option, to transfer at any time to itself or to its nominee the Collateral, or
any part thereof, and to receive the monies, income, proceeds or benefits
attributable or accruing thereto and to hold the same as security for the
Obligations or to apply the same on the principal and interest or other amounts
owing on any of the Obligations, whether or not then due, in such order or
manner as Secured Party may elect. Secured Party is further expressly granted
the rights, exercisable at its option at any time, whether before or after
default, to take control of any proceeds, payments, monies, income, collections
or benefits and to notify account debtors, lessees, obligors on any instruments
or other obligors to make all payments directly to Secured Party on any and all
accounts, leases, instruments, or obligations, constituting, at any time or
from time to time, a part of the Collateral and to make payment directly to
Secured Party of all such income, monies, proceeds or other benefits; and
Debtor will, upon request of Secured Party, so notify all such account debtors,
lessees or obligors. Without limiting in any way the generality
(Security Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
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of the preceding sentences, it is expressly acknowledged and agreed by Debtor
and Secured Party that Secured Party shall have the express right, at its
option, to receive directly any and all cash payable to Debtor on, or otherwise
in respect of, any Overriding Royalty Interest and apply such amounts as
received to the outstanding principal balance of the Obligations, whether or
not then due, without further consent or authorization from Debtor.
(3) All recitals in any instrument of assignment or any other
instrument executed by Secured Party incident to sale, transfer, assignment or
other disposition or utilization of the Collateral or any part thereof
hereunder shall be full proof of the matters stated therein and no other proof
shall be requisite to establish full legal propriety of the sale or other
action taken by Secured Party or of any fact, condition or thing incident
thereto and all prerequisites of such sale or other action or of any fact,
condition or thing incident thereto shall be presumed conclusively to have been
performed or to have occurred.
(4) All rights to marshalling of assets of Debtor, including
any such right with respect to the Collateral, are hereby waived by Debtor.
(5) The right of Secured Party to take possession or control
of the Collateral upon the happening of any of the events or conditions
constituting a default may be exercised without resort to any court proceeding
or judicial process whatever and without any hearing whatever thereon; and, in
this connection, DEBTOR EXPRESSLY WAIVES ANY CONSTITUTIONAL RIGHTS OF DEBTOR
WITH REGARD TO NOTICE, ANY JUDICIAL PROCESS OR ANY HEARING PRIOR TO THE
EXERCISE OF THE RIGHT OF SECURED PARTY TO TAKE POSSESSION OR CONTROL OF THE
COLLATERAL UPON THE HAPPENING OF ANY OF THE EVENTS OR CONDITIONS CONSTITUTING A
DEFAULT.
V. General
(1) Secured Party may, at its option, whether or not the
Obligations are due, demand, ▇▇▇ for, collect or make any compromise or
settlement it deems desirable with reference to the Collateral. Secured Party
shall not be obligated to take any steps necessary to preserve any rights in
the Collateral against other parties, which Debtor hereby assumes to do.
(2) This Security Agreement shall not be construed as
relieving Debtor from full personal liability on the Obligations and any and
all future and other indebtedness secured hereby and for any deficiency
thereon.
(3) If maturity of the Obligations shall be accelerated for
any reason, the full amount of any interest then unearned which has been
collected theretofore by or for Secured Party shall thereupon be credited
against the Obligations. Notwithstanding any other provision in this Security
Agreement or in the Obligations
(Security Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
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or any of them, Debtor shall never be liable for unearned interest on the
Obligations, or on any of them, and shall further never be required to pay
interest on the Obligations, or on any of them, at a rate in excess of the
maximum percentage rate authorized and allowed by applicable law. The intent
of the parties being to conform and comply fully with all laws concerning usury
applicable hereto or to the Obligations or any part thereof, any agreement
concerning interest in any of the foregoing shall be subject to reduction to
the amount allowed under the applicable laws with respect to usury, as now or
hereafter construed by the courts with jurisdiction thereof, and any interest
collected in excess of the amount authorized and permitted by such laws shall
be refunded to the person paying the same, or credited against the Obligations.
(4) No delay or omission on the part of Secured Party in
exercising any right hereunder shall operate as a waiver of any such right or
any other right. A waiver on any one or more occasions shall not be construed
as a bar to or waiver of any right or remedy on any future occasion.
(5) The execution and delivery of this Security Agreement in
no manner shall impair or affect any other security (by endorsement or
otherwise) for the payment of the Obligations and no security taken hereafter
as security for payment of any part or all of the Obligations shall impair in
any manner or affect this Security Agreement, all such present and future
additional security to be considered as cumulative security. Any of the
Collateral may be released from this Security Agreement without altering,
varying or diminishing in any way the force, effect, lien, security interest,
or charge of this Security Agreement as to the Collateral not expressly
released, and this Security Agreement shall continue as a first lien, security
interest and charge on all of the Collateral not expressly released until all
sums and indebtedness secured hereby have been paid in full. Any future
assignment or attempted assignment or transfer of the interest of Debtor in and
to any of the Collateral shall not deprive Secured Party of the right to sell
or otherwise dispose of or utilize all of the Collateral as above provided or
necessitate the sale or disposition thereof in parcels or in severalty.
(6) Any notice or demand to Debtor hereunder or in connection
herewith may be given and shall conclusively be deemed and considered to have
been given and received upon the deposit thereof, in writing, in the United
States mails, duly stamped and addressed to Debtor either at the street address
first shown hereinabove or at the mailing address, if any, given for Debtor at
the beginning of this Security Agreement; but actual notice, however given or
received, shall always be effective.
(7) All rights of Secured Party hereunder shall inure to the
benefit of its successors and assigns; and all obligations of Debtor shall bind
his heirs, executors, or administrators, and his or its successors or assigns.
If there be more than one Debtor, their obligations hereunder shall be joint
and several.
(8) Each term used in this Security Agreement, unless the
context otherwise requires, and in all events subject to any express
definitions set forth in this
(Security Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
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Security Agreement, shall be deemed to have the same meaning herein as that
given each such term under the Uniform Commercial Code, as adopted and as
amended in the State of Texas.
(9) As used in this Security Agreement and when required by
the context, each number (singular and plural) shall include all numbers, and
each gender shall include all genders; and unless the context otherwise
requires, the word "person" shall include "corporation, firm or association."
(10) The law governing this secured transaction shall be that
of the State of Texas existing as of the date hereof; provided, that if any
additional rights or remedies are granted by the law of Texas to secured
parties or to persons similarly situated to Secured Party, then Secured Party
shall also have and may exercise any such additional rights or remedies.
Signed in multiple original counterparts and delivered on the day and year
first above written.
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▇▇▇▇▇ ▇. ▇▇▇▇
The undersigned, ____________________, is the spouse of Debtor and in such
capacity executes the Security Agreement for the purpose of binding any and all
rights (including spousal rights and community property rights) that she may
have in the Collateral.
----------------------------------------
(Security Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇) ___________________________
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EXHIBIT E
INCENTIVE STOCK OPTION AGREEMENT
AGREEMENT made this _______ day of ________, 199__, between MARINER
HOLDINGS, INC., a Delaware corporation (the "Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇
("Employee").
To carry out the purposes of the MARINER HOLDINGS, INC. 1996 STOCK
OPTION PLAN (the "Plan"), by affording Employee the opportunity to purchase
shares of the common stock of the Company ("Stock"), and in consideration of
the mutual agreements and other matters set forth herein and in the Plan, the
Company and Employee hereby agree as follows:
1. GRANT OF OPTION. The Company hereby irrevocably grants to
Employee the right and option ("Option") to purchase all or any part of an
aggregate of _______ shares of Stock, on the terms and conditions set forth
herein and in the Plan, which Plan is incorporated herein by reference as a
part of this Agreement. Exercise of this Option is subject to, and contingent
upon, approval of the Plan by the shareholders of the Company on or before 12
months after the date the Plan was adopted by the Board of Directors of the
Company. This Option is intended to constitute an incentive stock option,
within the meaning of section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), to the extent that it is exercised within the periods
described in sections 422(a)(2), 422(c)(6) and 421(c) of the Code, as
applicable, and, to the extent that it is not so exercised, it is not intended
to constitute an incentive stock option within the meaning of section 422(b) of
the Code.
2. PURCHASE PRICE. The purchase price of Stock purchased pursuant
to the exercise of this Option shall be $100.00 per share, which has been
determined to be not less than the fair market value of the Stock at the date
of grant of this Option. For all purposes of this Agreement, fair market value
of Stock shall be determined in accordance with the provisions of the Plan.
3. EXERCISE OF OPTION. Subject to the earlier expiration of this
Option as herein provided, this Option may be exercised, by written notice to
the Company at its principal executive office addressed to the attention of its
Chief Executive Officer at any time and from time to time after the date of
grant hereof, but, except as otherwise provided below, this Option shall not be
exercisable for more than a percentage of the aggregate number of shares
offered by this Option determined by the number of full
Incentive Stock Option Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇
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years from the date of grant hereof to the date of such exercise, in accordance
with the following schedule:
PERCENTAGE OF SHARES
NUMBER OF FULL YEARS THAT MAY BE PURCHASED
-------------------- ---------------------
Less than 1 year 0%
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years or more 100%
The foregoing schedule notwithstanding, this Option shall become exercisable in
full upon the occurrence of an "Initial Public Offering" (as such term is
defined in D.2(d) of the Stockholders' Agreement, dated April 2, 1996, between
Enron Capital & Trade Resources Corp., Mystery Acquisition, Inc. (now known as
Mariner Holdings, Inc.) and certain other parties.) In addition,
notwithstanding the terms of the Plan or this Agreement (including, but not
limited to, the foregoing schedule), Employee shall be entitled to exercise any
unvested portion of this Option to the extent, but only to the extent,
necessary to allow Employee to sell shares of Stock Employee is actually
selling pursuant to Section D.3(c) of that certain Stockholders' Agreement,
dated April 2, 1996, between Enron Capitol & Trade Resources Corp., Mystery
Acquisition, Inc. (now known as Mariner Holdings, Inc.) and certain other
parties, as amended (it being the intent of the parties that Employee first
sell shares of Stock he already owns, then shares of Stock issuable on exercise
of any portion of this Option then vested, and finally, if necessary, shares of
Stock issuable on exercise of any portion of this Option not then vested).
This Option may be exercised only while Employee remains an employee or
consultant of the Company, except that:
(a) If Employee dies, becomes disabled, retires, is terminated
by the Company without "Cause" or voluntarily terminates his
employment for "Good Reason", this Option shall immediately
become exercisable in full and shall remain fully exercisable
until the expiration of the seven year Option period described
below.
(b) If Employee voluntarily terminates his employment other
than for "Good Reason", this Option shall remain exercisable at
any time during the thirty day period immediately following such
termination of employment but only as to the number of shares
Employee was entitled to purchase hereunder as of the date
Employee's employment so terminates and at the end of such thirty
day period this Option shall terminate and cease to be
exercisable.
Incentive Stock Option Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇
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(c) If Employee's employment is terminated by the Company for
"Cause" this Option shall terminate immediately and shall cease
to be exercisable.
This Option, after it becomes exercisable, whether partially or fully, may be
exercised by Employee or Employee's estate or the person who acquires this
Option by will or the laws of descent and distribution as to all or any part of
the Option that is exercisable at any time and from time to time until all of
the Options or Stock available for exercise under this Agreement has been
exercised or the Option has terminated under another provision of this
Agreement. This Option shall terminate and shall not be exercisable in any
event after the seventh anniversary of the date of its grant. As used in this
paragraph, the terms "Cause" and "Good Reason" shall have the same meanings as
such terms are defined in the employment contract between Employee and Mariner
Energy, Inc., a Delaware corporation and wholly-owned subsidiary of the
Company, as of the date of grant of this Option.
The purchase price of shares as to which this Option is exercised shall
be paid in full at the time of exercise (a) in cash (including check, bank
draft or money order payable to the order of the Company), or (b) by delivering
to the Company shares of Stock having a fair market value equal to the purchase
price, or (c) a combination of cash and Stock. No fraction of a share of Stock
shall be issued by the Company upon exercise of an Option or accepted by the
Company in payment of the exercise price thereof; rather, Employee shall
provide a cash payment for such amount as is necessary to effect the issuance
and acceptance of only whole shares of Stock. Unless and until a certificate
or certificates representing such shares shall have been issued by the Company
to Employee, Employee (or the person permitted to exercise this Option in the
event of Employee's death) shall not be or have any of the rights or privileges
of a shareholder of the Company with respect to shares acquirable upon an
exercise of this Option.
4. TAX GROSS-UP; WITHHOLDING OF TAX.
(a) As soon as administratively practicable after the date of any
exercise of this Option which does not qualify as the exercise of an incentive
stock option within the meaning of section 422(b) of the Code, the Company
shall pay to Employee in cash an amount such that after payment by Employee of
Federal income taxes on such amount (which taxes shall be assumed to be
assessed at the highest ordinary income tax rate applicable to individuals on
such date), Employee retains a portion of the payment equal to the difference,
if any, between (i) the amount of Federal income tax payable on the difference
between the fair market value on such date of the Stock acquired by such
exercise over the purchase price paid therefor (the "Spread") at the highest
ordinary income tax rate applicable to individuals on such date and (ii) the
amount of Federal income tax payable on the Spread at the highest long-term
capital gains tax rate applicable to individuals on such date; provided,
however, that the Company shall have no obligation to make any such payment if
a change in Federal tax laws enacted after the date of grant of this Option
eliminates the Company's right to deduct the Spread from its taxable income.
Incentive Stock Option Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇
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75
(b) To the extent that the exercise of this Option or the disposition
of shares of Stock acquired by exercise of this Option results in compensation
income to Employee for federal or state income tax purposes, Employee shall
deliver to the Company at the time of such exercise or disposition such amount
of money or shares of Stock as the Company may require to meet its obligation
under applicable tax laws or regulations, and, if Employee fails to do so, the
Company is authorized to withhold from any cash or Stock remuneration then or
thereafter payable to Employee any tax required to be withheld by reason of
such resulting compensation income. Upon an exercise of this Option, the
Company is further authorized in its discretion to satisfy any such withholding
requirement out of any cash or shares of Stock distributable to Employee upon
such exercise.
5. STOCKHOLDER AGREEMENT. Shares of Stock purchased pursuant to the
exercise of this Option shall be subject to the terms of any Stockholder
Agreement among the Company and/or all or certain of its shareholders, as the
same may be amended or restated from time to time (each, a "Stockholder
Agreement"), relating to such shares of Stock, including, but not limited to,
the transfer thereof. Employee agrees that Employee and Employee's spouse, if
any, will, on the first date of exercise of this Option, execute and deliver to
the Company such documents and instruments as the Board of Directors of the
Company, in its discretion, may require to evidence such persons' agreement to
be bound by the terms of any Stockholder Agreement.
6. STATUS OF STOCK. Employee understands that at the time of the
execution of this Agreement the shares of Stock to be issued upon exercise of
this Option have not been registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities law, and that the Company does not
currently intend to effect any such registration. Until the shares of Stock
acquirable upon the exercise of the Option have been registered for issuance
under the Act, the Company will not issue such shares unless the holder of the
Option provides the Company with a written opinion of legal counsel, who shall
be satisfactory to the Company, addressed to the Company and satisfactory in
form and substance to the Company's counsel, to the effect that the proposed
issuance of such shares to such Option holder may be made without registration
under the Act. In the event exemption from registration under the Act is
available upon an exercise of this Option, Employee (or the person permitted to
exercise this Option in the event of Employee's death or incapacity), if
requested by the Company to do so, will execute and deliver to the Company in
writing an agreement containing such provisions as the Company may require to
assure compliance with applicable securities laws.
Employee agrees that the shares of Stock which Employee may acquire by
exercising this Option shall be acquired for investment without a view to
distribution, within the meaning of the Act, and shall not be sold,
transferred, assigned, pledged or hypothecated in the absence of an effective
registration statement for the shares under the Act and applicable state
securities laws or an applicable exemption from the registration requirements
of the Act and any applicable state securities laws. Employee also agrees that
the shares of Stock which Employee may acquire by exercising this
Incentive Stock Option Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇
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Option will not be sold or otherwise disposed of in any manner which would
constitute a violation of any applicable securities laws, whether federal
or state.
In addition, Employee agrees that (i) the certificates representing the
shares of Stock purchased under this Option may bear such legend or legends as
the Committee (as such term is defined in the Plan) deems appropriate in order
to assure compliance with the Stockholder Agreement and applicable securities
laws, (ii) the Company may refuse to register the transfer of the shares of
Stock purchased under this Option on the stock transfer records of the Company
if such proposed transfer would in the opinion of counsel satisfactory to the
Company constitute a violation of the Stockholder Agreement or any applicable
securities law, and (iii) the Company may give related instructions to its
transfer agent, if any, to stop registration of the transfer of the shares of
Stock purchased under this Option.
7. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement,
Employee shall be considered to be in the employment of the Company as long as
Employee remains an employee of either the Company, a parent or subsidiary
corporation (as defined in section 424 of the Code) of the Company, or a
corporation or a parent or subsidiary of such corporation assuming or
substituting a new option for this Option. Any question as to whether and when
there has been a termination of such employment, and the cause of such
termination, shall be determined by the Committee and its determination shall
be final.
8. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
9. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and Employee has executed
this Agreement, all as of the day and year first above written.
MARINER HOLDINGS, INC.
By:
------------------------------
Printed Name:
------------------------
Printed Title:
-----------------------
EMPLOYEE:
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EXHIBIT F
NONSTATUTORY STOCK OPTION AGREEMENT
AGREEMENT made as of the ______ day of ______, 19__, between MARINER
HOLDINGS, INC., a Delaware corporation (the "Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇
("Employee").
To carry out the purposes of the MARINER HOLDINGS, INC. 1996 STOCK
OPTION PLAN (the "Plan"), by affording Employee the opportunity to purchase
shares of common stock of the Company ("Stock"), and in consideration of the
mutual agreements and other matters set forth herein and in the Plan, the
Company and Employee hereby agree as follows:
1. GRANT OF OPTION. The Company hereby irrevocably grants to
Employee the right and option ("Option") to purchase all or any part of an
aggregate of ______ shares of Stock, on the terms and conditions set forth
herein and in the Plan, which Plan is incorporated herein by reference as a
part of this Agreement. Exercise of this Option is subject to, and contingent
upon, approval of the Plan by the stockholders of the Company on or before 12
months after the date the Plan was adopted by the Board of Directors of the
Company. This Option shall not be treated as an incentive stock option within
the meaning of section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code").
2. PURCHASE PRICE. The purchase price of Stock purchased pursuant
to the exercise of this Option shall be $100.00 per share, which has been
determined to be not less than the fair market value of the Stock at the date
of grant of this Option. For all purposes of this Agreement, fair market value
of Stock shall be determined in accordance with the provisions of the Plan.
3. EXERCISE OF OPTION. Subject to the earlier expiration of this
Option as herein provided, this Option may be exercised, by written notice to
the Company at its principal executive office addressed to the attention of its
Chief Executive Officer, at any time and from time to time after the date of
grant hereof, but, except as otherwise provided below, this Option shall not be
exercisable for more than a percentage of the aggregate number of shares
offered by this Option determined by the number of full years from the date of
grant hereof to the date of such exercise, in accordance with the following
schedule:
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PERCENTAGE OF SHARES
NUMBER OF FULL YEARS THAT MAY BE PURCHASED
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Less than 1 year 0%
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years or more 100%
The foregoing schedule notwithstanding, this Option shall become exercisable in
full upon the occurrence of an "Initial Public Offering" (as such term is
defined in D.2(d) of the Stockholders' Agreement, dated April 2, 1996, between
Enron Capital & Trade Resources Corp., Mystery Acquisition, Inc. (now known as
Mariner Holdings, Inc.) and certain other parties.) In addition,
notwithstanding the terms of the Plan or this Agreement (including, but not
limited to, the foregoing schedule), Employee shall be entitled to exercise any
unvested portion of this Option to the extent, but only to the extent,
necessary to allow Employee to sell shares of Stock Employee is actually
selling pursuant to Section D.3(c) of that certain Stockholders' Agreement,
dated April 2, 1996, between Enron Capitol & Trade Resources Corp., Mystery
Acquisition, Inc. (now known as Mariner Holdings, Inc.) and certain other
parties, as amended (it being the intent of the parties that Employee first
sell shares of Stock he already owns, then shares of Stock issuable on exercise
of any portion of this Option then vested, and finally, if necessary, shares of
Stock issuable on exercise of any portion of this Option not then vested).
This Option may be exercised only while Employee remains an employee or
consultant of the Company, except that:
(a) If Employee dies, becomes disabled, retires, is terminated
by the Company without "Cause" or voluntarily terminates his
employment for "Good Reason", this Option shall immediately
become exercisable in full and shall remain fully exercisable
until the expiration of the seven year Option period described
below.
(b) If Employee voluntarily terminates his employment other
than for "Good Reason", this Option shall remain exercisable at
any time during the thirty day period immediately following such
termination of employment but only as to the number of shares
Employee was entitled to purchase hereunder as of the date
Employee's employment so terminates and at the end of such thirty
day period this Option shall terminate and cease to be
exercisable.
(c) If Employee's employment is terminated by the Company for
"Cause" this Option shall terminate immediately and shall cease
to be exercisable.
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This Option, after it becomes exercisable, whether partially or fully, may be
exercised by Employee or Employee's estate or the person who acquires this
Option by will or the laws of descent and distribution as to all or any part of
the Option that is exercisable at any time and from time to time until all of
the Options or Stock available for exercise under this Agreement has been
exercised or the Option has terminated under another provision of this
Agreement. This Option shall terminate and shall not be exercisable in any
event after the seventh anniversary of the date of its grant. As used in this
paragraph, the terms "Cause" and "Good Reason" shall have the same meanings as
such terms are defined in the employment contract between Employee and Mariner
Energy, Inc., a Delaware corporation and wholly-owned subsidiary of the
Company, as of the date of grant of this Option.
The purchase price of shares as to which this Option is exercised shall
be paid in full at the time of exercise (a) in cash (including check, bank
draft or money order payable to the order of the Company), (b) by delivering to
the Company shares of Stock having a fair market value equal to the purchase
price, or (c) any combination of cash or Stock. No fraction of a share of
Stock shall be issued by the Company upon exercise of an Option or accepted by
the Company in payment of the purchase price thereof; rather, Employee shall
provide a cash payment for such amount as is necessary to effect the issuance
and acceptance of only whole shares of Stock. Unless and until a certificate
or certificates representing such shares shall have been issued by the Company
to Employee, Employee (or the person permitted to exercise this Option in the
event of Employee's death) shall not be or have any of the rights or privileges
of a shareholder of the Company with respect to shares acquirable upon an
exercise of this Option.
4. TAX GROSS-UP; WITHHOLDING OF TAX.
(a) As soon as administratively practicable after the date of each
exercise of this Option, the Company shall pay to Employee in cash an amount
such that after payment by Employee of Federal income taxes on such amount
(which taxes shall be assumed to be assessed at the highest ordinary income tax
rate applicable to individuals on such date), Employee retains a portion of the
payment equal to the difference, if any, between (i) the amount of Federal
income tax payable on the difference between the fair market value on such date
of the Stock acquired by such exercise over the purchase price paid therefor
(the "Spread") at the highest ordinary income tax rate applicable to
individuals on such date and (ii) the amount of Federal income tax payable on
the Spread at the highest long-term capital gains tax rate applicable to
individuals on such date; provided, however, that the Company shall have no
obligation to make any such payment if a change in Federal tax laws enacted
after the date of grant of this Option eliminates the Company's right to deduct
the Spread from its taxable income.
(b) To the extent that the exercise of this Option or the disposition
of shares of Stock acquired by exercise of this Option results in compensation
income to Employee for federal or state income tax purposes, Employee shall
deliver to the Company at the time of such exercise or disposition such amount
of money or shares of Stock as the Company may require to meet its obligation
under applicable tax laws or regulations,
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and, if Employee fails to do so, the Company is authorized to withhold from any
cash or Stock remuneration then or thereafter payable to Employee any tax
required to be withheld by reason of such resulting compensation income. Upon
an exercise of this Option, the Company is further authorized in its discretion
to satisfy any such withholding requirement out of any cash or shares of Stock
distributable to Employee upon such exercise.
5. STOCKHOLDER AGREEMENT. Shares of Stock purchased pursuant to the
exercise of this Option shall be subject to the terms of any Stockholder
Agreement among the Company and/or all or certain of its shareholders, as the
same may be amended or restated from time to time (each, a "Stockholder
Agreement"), relating to such shares of Stock, including, but not limited to,
the transfer thereof. Employee agrees that Employee and Employee's spouse, if
any, will, on the first date of exercise of this Option, execute and deliver to
the Company such documents and instruments as the Board of Directors of the
Company, in its discretion, may require to evidence such persons' agreement to
be bound by the terms of any Stockholder Agreement.
6. STATUS OF STOCK. Employee understands that at the time of the
execution of this Agreement the shares of Stock to be issued upon exercise of
this Option have not been registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities law, and that the Company does not
currently intend to effect any such registration. Until the shares of Stock
acquirable upon the exercise of the Option have been registered for issuance
under the Act, the Company will not issue such shares unless the holder of the
Option provides the Company with a written opinion of legal counsel, who shall
be satisfactory to the Company, addressed to the Company and satisfactory in
form and substance to the Company's counsel, to the effect that the proposed
issuance of such shares to such Option holder may be made without registration
under the Act. In the event exemption from registration under the Act is
available upon an exercise of this Option, Employee (or the person permitted to
exercise this Option in the event of Employee's death), if requested by the
Company to do so, will execute and deliver to the Company in writing an
agreement containing such provisions as the Company may require to assure
compliance with applicable securities laws.
Employee agrees that the shares of Stock which Employee may acquire by
exercising this Option shall be acquired for investment without a view to
distribution, within the meaning of the Act, and shall not be sold,
transferred, assigned, pledged or hypothecated in the absence of an effective
registration statement for the shares under the Act and applicable state
securities laws or an applicable exemption from the registration requirements
of the Act and any applicable state securities laws. Employee also agrees that
the shares of Stock which Employee may acquire by exercising this Option will
not be sold or otherwise disposed of in any manner which would constitute a
violation of any applicable securities laws, whether federal or state.
In addition, Employee agrees that (i) the certificates representing the
shares of Stock purchased under this Option may bear such legend or legends as
the Committee (as such term is defined in the Plan) deems appropriate in order
to assure compliance
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with the Stockholder Agreement and applicable securities laws, (ii) the Company
may refuse to register the transfer of the shares of Stock purchased under this
Option on the stock transfer records of the Company if such proposed transfer
would in the opinion of counsel satisfactory to the Company constitute a
violation of the Stockholder Agreement or any applicable securities law, and
(iii) the Company may give related instructions to its transfer agent, if any,
to stop registration of the transfer of the shares of Stock purchased under
this Option.
7. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement,
Employee shall be considered to be in the employment of the Company as long as
Employee remains either a consultant or an employee of either the Company, a
parent or subsidiary corporation (as defined in section 424 of the Code) of the
Company, or a corporation or a parent or subsidiary of such corporation
assuming or substituting a new option for this Option. Any question as to
whether and when there has been a termination of such employment, and the cause
of such termination, shall be determined by the Committee, and its
determination shall be final.
8. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
9. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and Employee has executed
this Agreement, all as of the day and year first above written.
MARINER HOLDINGS, INC.
By:
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Printed Name:
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Printed Title:
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EMPLOYEE:
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