THIS
EMPLOYMENT AGREEMENT (“Agreement”) is made by and
between Concho Resources Inc., a Delaware corporation
(“Company”), and Timothy A. Leach
(“Executive”).
WHEREAS ,
Executive is currently employed by Company or a subsidiary of
Company; and
WHEREAS ,
Company is desirous of continuing to employ Executive in an
executive capacity on the terms and conditions, and for the
consideration, hereinafter set forth and Executive is desirous of
continuing to be employed by Company on such terms and conditions
and for such consideration;
NOW,
THEREFORE , for and in consideration of the mutual promises,
covenants and obligations contained herein, Company and Executive
agree as follows:
ARTICLE 1:
DEFINITIONS AND INTERPRETATIONS
(a)
“Annual Base Salary” shall mean an amount equal
to the greater of:
(i)
Executive’s base salary at the annual rate in effect pursuant
to Section 4.1 at the date of Executive’s Involuntary
Termination;
(ii)
Executive’s base salary at the annual rate in effect pursuant
to Section 4.1 on the date that is 60 days prior to the date
of Executive’s Involuntary Termination; or
(iii)
Executive’s base salary at the annual rate in effect pursuant
to Section 4.1 immediately prior to a Change of Control if
Executive’s employment shall be subject to an Involuntary
Termination during the Change of Control Period.
(b)
“Board” shall mean the Board of Directors of
Company.
(c)
“Cause” shall mean Executive (i) has
engaged in gross negligence, gross incompetence or willful
misconduct in the performance of Executive’s duties,
(ii) has refused, without proper reason, to perform
Executive’s duties, (iii) has materially breached any
material provision of this Agreement or corporate policy or code of
conduct established by Company, (iv) has willfully engaged in
conduct which is materially injurious to Company or its
subsidiaries (monetarily or otherwise), (v) has committed an
act of fraud, embezzlement or willful breach of a fiduciary duty to
Company or an affiliate (including the unauthorized disclosure of
confidential or proprietary material
information of
Company or an affiliate), or (vi) has been convicted of (or
pleaded no contest to) a crime involving fraud, dishonesty or moral
turpitude or any felony.
(d)
“Change in Duties” shall mean:
(i) The
occurrence, prior to the date that a Change of Control Period
begins or after the expiration of a Change of Control Period, of
any one or more of the following without the consent of
Executive:
(1) a reduction in
the rank of Executive’s title as an officer of Company from
that previously applicable to Executive (it is specifically agreed
that any change in Executive’s position(s) or title(s) with
Company shall not constitute a Change in Duties under this clause
unless the rank of Executive’s title as an officer is reduced
in connection with such change (for example, a reduction in rank
from vice president to assistant vice president));
(2) a reduction in
Executive’s base salary; or
(3) a material
diminution in employee benefits (including but not limited to
medical, dental, life insurance and long-term disability plans) and
perquisites applicable to Executive from those substantially
similar to the employee benefits and perquisites provided by
Company (including its subsidiaries) to similarly situated
executives; or
(ii) The
occurrence, within a Change of Control Period, of any one or more
of the following without the consent of Executive:
(1) a material
reduction in the nature or scope of Executive’s authorities
or duties from those applicable to Executive immediately prior to
the date on which a Change of Control Period begins;
(2) a reduction in
Executive’s base salary from that provided to Executive
immediately prior to the date on which a Change of Control Period
begins;
(3) a diminution
in Executive’s eligibility to participate in bonus, stock
option, incentive award and other compensation plans which provide
opportunities to receive compensation which are the greater of
(A) the opportunities provided by Company (including its
subsidiaries) for similarly situated executives or (B) the
opportunities under any such plans under which Executive was
participating immediately prior to the date on which a Change of
Control Period begins;
(4) a material
diminution in employee benefits (including but not limited to
medical, dental, life insurance and long-term disability plans) and
perquisites applicable to Executive from the greater of
(A) the employee benefits and perquisites provided by Company
(including its
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subsidiaries)
to similarly situated executives or (B) the employee benefits
and perquisites to which Executive was entitled immediately prior
to the date on which a Change of Control Period begins;
or
(5) a change in
the location of Executive’s principal place of employment by
Company (including its subsidiaries) by more than 10 miles from the
location where Executive was principally employed immediately prior
to the date on which a Change of Control Period begins.
(e)
“Change of Control” shall mean:
(i) a merger of
Company with another entity, a consolidation involving Company, or
the sale of all or substantially all of the assets of Company to
another entity if, in any such case, (1) the holders of equity
securities of Company immediately prior to such transaction or
event do not beneficially own immediately after such transaction or
event equity securities of the resulting entity entitled to 50% or
more of the votes then eligible to be cast in the election of
directors generally (or comparable governing body) of the resulting
entity in substantially the same proportions that they owned the
equity securities of Company immediately prior to such transaction
or event or (2) the persons who were members of the Board
immediately prior to such transaction or event shall not constitute
at least a majority of the board of directors of the resulting
entity immediately after such transaction or event;
(ii) the
dissolution or liquidation of Company;
(iii) when any
person or entity, including a “group” as contemplated
by Section 13(d)(3) of the Securities Exchange Act of 1934, other
than an Excluded Person acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of
the combined voting power of the outstanding securities of Company;
or
(iv) as a result
of or in connection with a contested election of directors, the
persons who were members of the Board immediately before such
election shall cease to constitute a majority of the
Board.
For purposes of
the preceding sentence, (1) “resulting entity” in the
context of a transaction or event that is a merger, consolidation
or sale of all or substantially all assets shall mean the surviving
entity (or acquiring entity in the case of an asset sale) unless
the surviving entity (or acquiring entity in the case of an asset
sale) is a subsidiary of another entity and the holders of common
stock of Company receive capital stock of such other entity in such
transaction or event, in which event the resulting entity shall be
such other entity, and (2) subsequent to the consummation of a
merger or consolidation that does not constitute a Change of
Control, the term “Company” shall refer to the
resulting entity and the term “Board” shall refer to
the board of directors (or comparable governing body) of the
resulting entity.
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(f)
“Change of Control Period” shall mean, with
respect to a Change of Control, the two-year period beginning on
the date upon which such Change of Control occurs.
(g)
“Code” shall mean the Internal Revenue Code of
1986, as amended.
(h)
“Compensation Committee” shall mean the
Compensation Committee of the Board.
(i)
“Disability” shall mean that, as a result of
Executive’s incapacity due to physical or mental illness,
Executive shall have been absent from the full-time performance of
Executive’s duties for six consecutive months and Executive
shall not have returned to full-time performance of
Executive’s duties within 30 days after written notice
of termination is given to Executive by Company (provided, however,
that such notice may not be given prior to 30 days before the
expiration of such six-month period).
(j)
“Effective Date” shall mean June 1,
2006.
(k)
“Excluded Person” means Chase Oil Corporation,
Yorktown Partners LLC, and their respective affiliates. For
purposes of this Section 1.1(k), (i) an
“affiliate” of an entity means any other person or
entity that, directly or indirectly, controls, is controlled by or
is under common control with, such specified entity through one or
more intermediaries or otherwise, and (ii) “control”
means, where used with respect to any person or entity, the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such person or
entity, whether through the ownership of voting securities, by
contract or otherwise, and the terms “controlling” and
“controlled” have correlative meanings.
(l)
“Involuntary Termination” shall mean any
termination of Executive’s employment with Company
which:
(i) does not
result from a resignation by Executive (other than a resignation
pursuant to clause (ii) of this Section 1.1(l));
or
(ii) results from
a resignation by Executive on or before the date which is 60 days
after the date upon which Executive receives notice of a Change in
Duties;
provided,
however, the term “Involuntary Termination”
shall not include a termination for Cause or any termination as a
result of death or Disability.
(m)
“Monthly Severance Amount” shall mean an amount
equal to one-twelfth of Executive’s Annual Base
Salary.
1.2
Interpretations . In this Agreement, unless a clear
contrary intention appears, (a) the words
“herein,” “hereof” and
“hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Article,
Section or other subdivision, (b) reference to any Article or
Section, means such Article or Section hereof, (c) the
words
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“including” (and with correlative
meaning “include”) means including, without limiting
the generality of any description preceding such term, and
(d) where any provision of this Agreement refers to action to
be taken by either party, or which such party is prohibited from
taking, such provision shall be applicable whether such action is
taken directly or indirectly by such party.
ARTICLE 2:
EMPLOYMENT AND DUTIES
2.1
Employment . Effective as of the Effective Date and
continuing for the period of time set forth in Section 3.1,
Executive’s employment by Company shall be subject to the
terms and conditions of this Agreement.
2.2
Positions . From and after the Effective Date,
(a) Executive shall serve as an officer of Company in the
position or positions determined by the Board and
(b) Executive shall be employed by Company or a subsidiary or
affiliate of Company. The Board may at any time and from time to
time assign Executive to a different position or positions with
Company and cause Executive to be employed by Company or any
subsidiary or affiliate of Company. Employment with a subsidiary or
affiliate of Company pursuant to the preceding sentence shall be
considered as employment with Company for purposes of this
Agreement.
2.3 Duties
and Services . Executive agrees to serve in the positions
referred to in Section 2.2 and to perform diligently and to
the best of Executive’s abilities the duties and services
appertaining to such offices, as well as such additional duties and
services appropriate to such offices which the parties mutually may
agree upon from time to time. Executive’s employment shall
also be subject to the policies maintained and established by
Company that are of general applicability to Company’s
executive employees, as such policies may be amended from time to
time.
2.4 Other
Interests . Executive agrees, during the period of
Executive’s employment by Company, to devote substantially
all of Executive’s business time, energy and best efforts to
the business and affairs of Company and its affiliates and not to
engage, directly or indirectly, in any other business or
businesses, whether or not similar to that of Company, except with
the consent of the Board. The foregoing notwithstanding, the
parties recognize and agree that Executive may engage in passive
personal investment and charitable activities that do not conflict
with the business and affairs of Company or interfere with
Executive’s performance of Executive’s duties
hereunder, which shall be at the sole determination of the Board.
As of the date of this Agreement, the Board has approved the
activities set forth on Attachment A to this Agreement.
2.5 Duty of
Loyalty . Executive acknowledges and agrees that Executive
owes a fiduciary duty of loyalty to act at all times in the best
interests of Company. In keeping with such duty, Executive shall
make full disclosure to Company of all business opportunities
pertaining to Company’s business and shall not appropriate
for Executive’s own benefit business opportunities concerning
Company’s business.
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ARTICLE 3:
TERM AND TERMINATION OF EMPLOYMENT
3.1
Term . Unless sooner terminated pursuant to other
provisions hereof, Company agrees to employ Executive for the
period beginning on the Effective Date and ending on the third
anniversary of the Effective Date (the “Initial Expiration
Date” ); provided, however, that beginning on the Initial
Expiration Date, and on each anniversary of the Initial Expiration
Date thereafter, if Executive’s employment under this
Agreement has not been terminated pursuant to Section 3.2 or
3.3, then said term of employment shall automatically be extended
for an additional one-year period unless on or before the date that
is 90 days prior to the first day of any such extension period
either party shall give written notice to the other that no such
automatic extension shall occur.
3.2
Company’s Right to Terminate . Notwithstanding the
provisions of Section 3.1, Company shall have the right to
terminate Executive’s employment under this Agreement at any
time for any of the following reasons:
(a) upon
Executive’s death;
(b) upon
Executive’s Disability;
(d) at any time,
for any other reason whatsoever, in the sole discretion of the
Board; provided, however, that Company may not terminate
Executive’s employment pursuant to this Section 3.2(d)
prior to the date that is four months after the Effective
Date.
3.3
Executive’s Right to Terminate . Notwithstanding
the provisions of Section 3.1 Executive shall have the right
to terminate Executive’s employment under this Agreement for
any of the following reasons:
(a) as a result of
a Change in Duties; provided, however, that prior to
Executive’s termination as a result of a Change in Duties,
Executive must give written notice to Company of the specific
occurrence that resulted in the Change in Duties and such
occurrence must remain uncorrected for 10 days following such
written notice; or
(b) at any time
for any other reason whatsoever, in the sole discretion of
Executive.
3.4 Notice
of Termination . If Company desires to terminate
Executive’s employment hereunder at any time prior to
expiration of the term of employment as provided in
Section 3.1, it shall do so by giving written notice to
Executive that it has elected to terminate Executive’s
employment hereunder and stating the effective date and reason for
such termination, provided that no such action shall alter or amend
any other provisions hereof or rights arising hereunder. If
Executive desires to terminate Executive’s employment
hereunder at any time prior to expiration of the term of employment
as provided in Section 3.1, Executive shall do so by giving a
30-day written notice to Company that Executive has elected to
terminate Executive’s employment hereunder and stating the
effective date and reason for such
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termination,
provided that no such action shall alter or amend any other
provisions hereof or rights arising hereunder.
3.5 Deemed
Resignations . Any termination of Executive’s
employment shall constitute an automatic resignation of Executive
as an officer of Company and each affiliate of Company, and an
automatic resignation of Executive from the Board (if applicable)
and from the board of directors or similar governing body of any
affiliate of Company and from the board of directors or similar
governing body of any corporation, limited liability company or
other entity in which Company or any affiliate holds an equity
interest and with respect to which board or similar governing body
Executive serves as Company’s or such affiliate’s
designee or other representative.
ARTICLE 4:
COMPENSATION AND BENEFITS
4.1 Base
Salary . During the period of this Agreement, Executive
shall receive a minimum base salary of $350,000.00 per annum.
Executive’s base salary may, in the sole discretion of the
Compensation Committee, be increased, but not decreased, effective
as of any date determined by the Compensation Committee.
Executive’s base salary shall be paid in equal installments
in accordance with Company’s standard policy regarding
payment of compensation to executives but no less frequently than
monthly.
4.2
Bonuses . Executive shall be eligible to participate in
Company’s annual cash incentive plan as approved from time to
time by the Board or the Compensation Committee in amounts to be
determined by the Compensation Committee based upon criteria
established by the Compensation Committee.
4.3 Other
Perquisites . During Executive’s employment
hereunder, Executive shall be afforded the following benefits as
incidences of Executive’s employment:
(a)
Business and Entertainment Expenses - Subject to
Company’s standard policies and procedures with respect to
expense reimbursement as applied to its executive employees
generally, Company shall reimburse Executive for, or pay on behalf
of Executive, reasonable and appropriate expenses incurred by
Executive for business related purposes, including dues and fees to
industry and professional organizations and costs of entertainment
and business development.
(b) Other
Company Benefits - Executive and, to the extent applicable,
Executive’s spouse, dependents and beneficiaries, shall be
allowed to participate in all benefits, plans and programs,
including improvements or modifications of the same, which are now,
or may hereafter be, available to other executive employees of
Company. Such benefits, plans and programs shall include, without
limitation, any profit sharing plan, thrift plan, health insurance
or health care plan, life insurance, disability insurance, pension
plan, supplemental retirement plan, vacation and sick leave plan,
and the like which may be maintained by Company. Company shall not,
however, by reason of this paragraph be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing, any
such benefit plan or program, so long as such changes are similarly
applicable to executive employees generally.
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(c) For safety,
security and efficiency, Executive will be entitled to utilize
aircraft owned or leased by Company for business and reasonable
personal use in North America and will not be required to reimburse
Company for any cost related to such use. In addition,
Executive’s immediate family members may use such Company
aircraft for their personal use to the same extent; provided,
however, that when a family member travels without Executive,
Executive shall reimburse Company for the variable costs of such
use. For purposes of the preceding sentence, the variable cost of
using Company’s aircraft means the variable costs directly
identifiable with each use (including fuel, pilot charges, landing
fees, hourly charges under co-ownership arrangements and other such
costs), but specifically excluding any fixed costs of the aircraft
(including acquisition costs and depreciation). Executive:
(i) shall not owe any additional amounts to Company under this
paragraph for guests or immediate family members traveling with
Executive; (ii) acknowledges that Company will report as
income to Executive the value of the usage of Company’s
aircraft under this paragraph as required by applicable law; and
(iii) shall pay all personal income taxes accruing as a result
of the personal use of Company’s aircraft by Executive, his
family or guests under this paragraph. The amount of reasonable
personal and family use shall be subject to annual review and
adjustment by the Compensation Committee.
ARTICLE 5:
EFFECT OF TERMINATION ON COMPENSATION; ADDITIONAL
PAYMENTS
5.1
Termination Other Than an Involuntary Termination . If
Executive’s employment hereunder shall terminate upon
expiration of the term provided in Section 3.1 because either
party has provided the notice contemplated in such Section, or if
Executive’s employment hereunder shall terminate for any
other reason except those described in Sections 5.2 and 5.3,
then all compensation and all benefits to Executive hereunder shall
continue to be provided until the date of such termination of
employment and such compensation an
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