PIONEER NATURAL RESOURCES
COMPANY
INDEMNIFICATION
AGREEMENT
This Agreement
(“Agreement”) is made and entered into as of the 16th
day of August, 2005, by and between Pioneer Natural Resources
Company, a Delaware corporation (the “Company”), and
Scott D. Sheffield (“Indemnitee”).
A. Highly
competent and experienced persons are reluctant to serve
corporations as directors, executive officers or in other
capacities unless they are provided with adequate protection
through insurance and indemnification against claims and actions
against them arising out of their service to and activities on
behalf of the Company.
B. The Board
of Directors of the Company (the “Board”) has
determined that the inability to attract and retain such persons
would be detrimental to the best interests of the Company and its
stockholders and that the Company should act to assure such persons
that there will be increased certainty of such protection in the
future.
C. The Board
has also determined that it is reasonable, prudent and necessary
for the Company, in addition to purchasing and maintaining
directors’ and officers’ liability insurance (or
otherwise providing for adequate arrangements of self-insurance),
contractually to obligate itself to indemnify such persons to the
fullest extent permitted by applicable law so that they will serve
or continue to serve the Company free from undue concern that they
will not be adequately protected.
D. Indemnitee
is willing to serve, continue to serve and to take on additional
service for or on behalf of the Company on the condition that
Indemnitee be so indemnified to the fullest extent permitted by
law.
E. Article Twelfth
of the Amended and Restated Certificate of Incorporation of the
Company provides for indemnification of directors and officers to
the fullest extent permitted by law.
In consideration
of the foregoing and the mutual covenants herein contained, and
other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereby agree as
follows:
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As used herein,
the following words and terms shall have the following respective
meanings (whether singular or plural):
“
Acquiring Person ” means any Person other than
(i) the Company, (ii) any of the Company’s
Subsidiaries, (iii) any employee benefit plan of the Company
or of a Subsidiary of the Company or of a Company owned directly or
indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, or
(iv) any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or of a Subsidiary of the
Company or of a Company owned directly or indirectly by the
stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
“ Change
in Control ” means the occurrence of any of the following
events:
(i) The
acquisition by any Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
40% or more of either (x) the then outstanding shares of
Common Stock of the Company (the “Outstanding Company Common
Stock”) or (y) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that
for purposes of this Subparagraph (i), the following acquisitions
shall not constitute a Change of Control: (A) any acquisition
directly from the Company, (B) any acquisition by the Company,
(C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(A), (B) and (C) of paragraph (iii) below;
or
(ii) Members
of the Incumbent Board cease for any reason to constitute at least
a majority of the Board; or
(iii) Consummation
of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company or an acquisition of assets of another corporation (a
“Business Combination”), in each case, unless,
following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as
a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and
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Outstanding
Company Voting Securities, as the case may be, (B) no Person
(excluding any employee benefit plan (or related trust) of the
Company or the corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 40% or more
of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership results
solely from ownership of the Company that existed prior to the
Business Combination and (C) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination;
or
(iv) Approval
by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
“
Claim ” means an actual or threatened claim or request
for relief which was, is or may be made by reason of anything done
or not done by Indemnitee in, or by reason of any event or
occurrence related to, Indemnitee’s Corporate
Status.
“
Corporate Status ” means the status of a person who
is, becomes or was a director, officer, employee, agent or
fiduciary of the Company or is, becomes or was serving at the
request of the Company as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, fiduciary or similar
functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise. For purposes of this Agreement,
the Company agrees that Indemnitee’s service on behalf of or
with respect to any Subsidiary of the Company shall be deemed to be
at the request of the Company.
“
DGCL ” means the Delaware General Corporation Law and
any successor statute thereto, as either of them may from time to
time be amended.
“
Disinterested Director ” with respect to any request
by Indemnitee for indemnification hereunder, means a director of
the Company who at the time of the vote is not a named defendant or
respondent in the Proceeding in respect of which indemnification is
sought by Indemnitee.
“
Exchange Act ” means the Securities Exchange Act of
1934.
“
Expenses ” means all attorneys’ fees and
disbursements, retainers, accountant’s fees and
disbursements, private investigator fees and disbursements, court
costs, transcript costs, fees and expenses of experts, witness fees
and expenses, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees
and all other disbursements, costs or expenses of the types
customarily incurred in connection with prosecuting, defending
(including affirmative defenses and counterclaims), preparing to
prosecute or defend, investigating, being or preparing to be a
witness in, or participating in or preparing to participate in
(including on appeal) a Proceeding and all interest or finance
charges attributable to any thereof. Should any payments by the
Company under this Agreement be determined to be subject to any
federal, state or local income or excise tax,
“Expenses” shall also include such
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amounts as are
necessary to place Indemnitee in the same after-tax position (after
giving effect to all applicable taxes) as Indemnitee would have
been in had no such tax been determined to apply to such
payments.
“
Incumbent Board ” means the individuals who, as of the
date of this Agreement, constitute the Board and any other
individual who becomes a director of the Company after that date
and whose election or appointment by the Board or nomination for
election by the Company’s stockholders was approved by a vote
of at least a majority of the directors then comprising the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Incumbent Board.
“
Independent Counsel ” means a law firm, or a member of
a law firm, that is experienced in matters of corporation law and
neither contemporaneously is, nor in the five years theretofore has
been, retained to represent: (a) the Company or Indemnitee in
any matter material to either such party (other than as Independent
Counsel under this Agreement or similar agreements), (b) any
other party to the Proceeding giving rise to a claim for
indemnification hereunder or (c) the beneficial owner,
directly or indirectly, of securities of the Company representing
5% or more of the combined voting power of the Company’s then
outstanding voting securities (other than, in each such case, with
respect to matters concerning the rights of Indemnitee under this
Agreement, or of other indemnitees under similar indemnification
agreements). Notwithstanding the foregoing, the term
“Independent Counsel” shall not include any person who,
under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.
“
Independent Directors ” means the directors on the
Board that are independent directors as defined in
Section 303A of the New York Stock Exchange Listed Company
Manual or successor provision, or, if the Company’s common
stock is not then quoted on the NYSE, that qualify as independent,
disinterested, or a similar term as defined in the rules of the
principal securities exchange or inter-dealer quotation system on
which the Company’s common stock is then listed or
quoted.
“
Person ” means any individual, entity or group (within
the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange
Act).
“
Potential Change in Control ” shall be deemed to have
occurred if (i) any Person shall have announced publicly an
intention to effect a Change in Control, or commenced any action
(such as the commencement of a tender offer for the Company’s
Common Stock or the solicitation of proxies for the election of any
of the Company’s directors) that, if successful, could
reasonably be expected to result in the occurrence of a Change in
Control; (ii) the Company enters into an agreement, the
consummation of which would constitute a Change in Control; or
(iii) any other event occurs which the Board declares to be a
Potential Change of Control.
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“
Proceeding ” means any threatened, pending or
completed action, suit, arbitration, investigation, inquiry,
alternate dispute resolution mechanism, administrative or
legislative hearing, or any other proceeding (including, without
limitation, any securities laws action, suit, arbitration,
alternative dispute resolution mechanism, hearing or procedure)
whether civil, criminal, administrative, arbitrative or
investigative and whether or not based upon events occurring, or
actions taken, before the date hereof, and any appeal in or related
to any such action, suit, arbitration, investigation, hearing or
proceeding and any inquiry or investigation (including discovery),
whether conducted by or in the right of the Company or any other
Person, that Indemnitee in good faith believes could lead to any
appeal in or related to, any such action, suit, arbitration,
alternative dispute resolution mechanism, hearing or other
proceeding.
“
Subsidiary ” means, with respect to any Person, any
corporation or other entity of which a majority of the voting power
of the voting equity securities or equity interest is owned,
directly or indirectly, by that Person.
“ Voting
Securities ” means any securities that vote generally in
the election of directors, in the admission of general partners, or
in the selection of any other similar governing body.
Indemnitee is
serving as a director and officer of the Company. Indemnitee may
from time to time also agree to serve, as the Company may request
from time to time, in another capacity for the Company (including
another officer or director position) or as a director, officer,
partner, venturer, proprietor, trustee, employee, agent, fiduciary
or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise. Indemnitee and the Company each
acknowledge that they have entered into this Agreement as a means
of inducing Indemnitee to serve, or continue to serve, the Company
in such capacities. Indemnitee may at any time and for any reason
resign from such position or positions (subject to any other
contractual obligation or any obligation imposed by operation of
law). The Company shall have no obligation under this Agreement to
continue Indemnitee in any such position or positions.
Section 3.1
General . Subject to the provisions set forth in
Article IV, the Company shall indemnify, and advance Expenses
to, Indemnitee to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable
law may thereafter from time to time permit. The other provisions
set forth in this Agreement are provided in addition to and as a
means of furtherance and implementation of, and not in limitation
of, the obligations expressed in this Article III. No
requirement, condition to or limitation of any right to
indemnification or to advancement of Expenses under this
Article III shall in any way limit the rights of Indemnitee
under Article VII.
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Section 3.2
Additional Indemnity of the Company . Indemnitee shall be
entitled to indemnification pursuant to this Section 3.2 if,
by reason of anything done or not done by Indemnitee in, or by
reason of any event or occurrence related to, Indemnitee’s
Corporate Status, Indemnitee is, was or becomes, or is threatened
to be made, a party to, or witness or other participant in any
Proceeding. Pursuant to this Section 3.2, Indemnitee shall be
indemnified against any and all Expenses, judgments, penalties
(including excise or similar taxes), fines and amounts paid in
settlement (including all interest, assessments and other charges
paid or payable in connection with or in respect of any such
Expenses, judgments, penalties, fines and amounts paid in
settlement) actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection with such Proceeding or any
Claim, issue or matter therein. Notwithstanding the foregoing, the
obligations of the Company under this Section 3.2 shall be
subject to the condition that no determination (which, in any case
in which Independent Counsel is involved, shall be in a form of a
written opinion) shall have been made pursuant to Article IV
that Indemnitee would not be permitted to be indemnified under
applicable law. Nothing in this Section 3.2 shall limit the
benefits of Section 3.1 or any other Section
hereunder.
Section 3.3
Advancement of Expenses . The Company shall pay all
reasonable Expenses incurred by, or in the case of retainers to be
incurred by, or on behalf of Indemnitee (or, if applicable,
reimburse Indemnitee for any and all Expenses reasonably incurred
by Indemnitee and previously paid by Indemnitee) in connection with
any Claim or Proceeding, whether brought by the Company or
otherwise, in advance of any determination respecting entitlement
to indemnification pursuant to Article IV hereof within
10 days after the receipt by the Company of (a) a written
request from Indemnitee requesting such payment or payments from
time to time, whether prior to or after final disposition of such
Proceeding, and (b) a written affirmation from Indemnitee of
Indemnitee’s good faith belief that Indemnitee has met the
standard of conduct necessary for Indemnitee to be permitted to be
indemnified under applicable law. Such statement or statements
shall reasonably evidence the Expenses incurred, or in the case of
retainers to be incurred, by Indemnitee. Any such payment by the
Company is referred to in this Agreement as an “Expense
Advance.” In connection with any request for an Expense
Advance, if requested by the Company, Indemnitee or
Indemnitee’s counsel shall also submit an affidavit stating
that the Expenses incurred were, or in the case of retainers to be
incurred are, reasonable. Any dispute as to the reasonableness of
any Expense shall not delay an Expense Advance by the Company, and
the Company agrees that any such dispute shall be resolved only
upon the disposition or conclusion of the underlying Claim against
Indemnitee. Indemnitee hereby undertakes and agrees (which
agreement shall be an unsecured obligation of Indemnitee) that
Indemnitee will reimburse and repay the Company without interest
for any Expenses Advance to the extent that it shall ultimately be
determined (in a final adjudication by a court from which there is
no further right of appeal or in a final adjudication of an
arbitration pursuant to Section 5.1 if Indemnitee elects to
seek such arbitration) that Indemnitee is not entitled to be
indemnified by the Company against such Expenses.
Section 3.4
Indemnification for Additional Expenses . The Company shall
indemnify Indemnitee against any and all costs and expenses (of the
types described in the definition of Expenses in Article I)
and, if requested by Indemnitee, shall (within two business days of
that request) advance those costs and expenses to Indemnitee, that
are incurred by Indemnitee in
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connection with
any claim asserted against, or action brought by, Indemnitee for
(i) indemnification or an Expense Advance by the Company under this
Agreement or any other agreement or provision of the
Company’s Certificate of Incorporation or Bylaws now or
hereafter in effect relating to any Claim or Proceeding,
(ii) recovery under any directors’ and officers’
liability insurance policies maintained by the Company, or
(iii) enforcement of, or claims for breaches of, any provision
of this Agreement, in each of the foregoing situations regardless
of whether Indemnitee ultimately is determined to be entitled to
that indemnification, advance expense payment, insurance recovery,
enforcement, or damage claim, as the case may be and regardless of
whether the nature of the proceeding with respect to such matters
is judicial, by arbitration, or otherwise.
Section 3.5
Partial Indemnity . If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for
some or a portion of the Expenses, judgments, fines, penalties, and
amounts paid in settlement of a Claim or Proceeding but not,
however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled. Moreover, notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any or all
Claims or Proceedings, or in defense of any issue or matter
therein, including dismissal without prejudice, Indemnitee shall be
indemnified against all Expenses incurred in connection
therewith.
Procedure for Determination of
Entitlement
to Indemnification
Section 4.1
Request by Indemnitee . To obtain indemnification under this
Agreement, Indemnitee shall submit to the Company a written
request, including therein or therewith such documentation and
information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification. The Secretary or an
Assistant Secretary of the Company shall, promptly upon receipt of
such a request for indemnification, advise the Board in writing
that Indemnitee has requested indemnification.
Section 4.2
Determination of Request . Upon written request by
Indemnitee for indemnification pursuant to the first sentence of
Section 4.1 hereof, a determination, if required by applicable
law, with respect to whether Indemnitee is permitted under
applicable law to be indemnified shall be made in accordance with
the terms of Section 4.5, in the specific case as
follows:
(a) If a Potential
Change in Control or a Change in Control shall have occurred, by
Independent Counsel (selected in accordance with Section 4.3)
in a written opinion to the Board and Indemnitee, unless Indemnitee
shall request that such determination be made by the Board, or a
committee of the Board, in which case by the person or persons or
in the manner provided for in clause (i) or (ii) of
paragraph (b) below; or
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(b) If a Potential
Change in Control or a Change in Control shall not have occurred,
(i) by the Board by a majority vote of the Disinterested
Directors even though less than a quorum of the Board, or
(ii) by a majority vote of a committee solely of two or more
Disinterested Directors designated to act in the matter by a
majority vote of all Disinterested Directors even though less than
a quorum of the Board, or (iii) by Independent Counsel
selected by the Board or a committee of the Board by a vote as set
forth in clauses (i) or (ii) of this paragraph (b), or if
such vote is not obtainable or such a committee cannot be
established, by a majority vote of all directors, or (iv) if
Indemnitee and the Company agree, by the stockholders of the
Company in a vote that excludes the shares held by directors who
are not Disinterested Directors.
If it is so
determined that Indemnitee is permitted to be indemnified under
applicable law, payment to Indemnitee shall be made within
10 days after such determination. Nothing contained in this
Agreement shall require that any determination be made under this
Section 4.2 prior to the disposition or conclusion of a Claim
or Proceeding against Indemnitee; provided, however, that
Expense Advances shall continue to be made by the Company pursuant
to, and to the extent required by, the provisions of
Article III. Indemnitee shall cooperate with the person or
persons making such determination with respect to
Indemnitee’s entitlement to indemnification, including
providing to such person upon reasonable advance request any
documentation or information that is not privileged or otherwise
protected from disclosure and that is reasonably available to
Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys’ fees and
disbursements) incurred by Indemnitee in so cooperating with the
person or persons making such determination shall be borne by the
Company (irrespective of the determination as to Indemnitee’s
entitlement to indemnification), and the Company shall indemnify
and hold harmless Indemnitee therefrom.
Section 4.3
Independent Counsel . If a Potential Change in Control or a
Change in Control shall not have occurred and the determination of
entitlement to indemnification is to be made by Independent
Counsel, the Independent Counsel shall be selected by (a) a
majority vote of the Disinterested Directors, even though less than
a quorum of the Board or (b) if there are no Disinterested
Directors, by a majority vote of the Board, and the Company shall
give written notice to Indemnitee, within 10 days after
receipt by the Company of Indemnitee’s request for
indemnification, specifying the identity and address of the
Independent Counsel so selected. If a Potential Change in Control
or a Change in Control shall have occurred and the determination of
entitlement to indemnification is to be made by Independent
Counsel, the Independent Counsel shall be selected by Indemnitee,
and Indemnitee shall give written notice to the Company, within
10 days after submission of Indemnitee’s request for
indemnification, specifying the identity and address of the
Independent Counsel so selected (unless Indemnitee shall request
that such sele
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