EXHIBIT 10.1
CONSULTING AND NON-COMPETITION
AGREEMENT
This CONSULTING AND NON-COMPETITION AGREEMENT
(“Agreement”) is made and entered into by Steffen E.
Palko, an individual (“Mr. Palko”), and XTO Energy
Inc., a Delaware corporation (the
“Company”).
RECITALS:
A. Mr. Palko is one of the founders
and is a director, the Vice Chairman and President of the Company,
which was created in 1986, and has participated in building the
Company into a major independent exploration and production company
and a member of the S&P 500.
B. Mr. Palko has special expertise
in the oil and gas business and has intimate knowledge of the
confidential information owned by the Company.
C. Mr. Palko desires to retire from
the Company, and the Company desires to (i) acknowledge Mr.
Palko’s contribution to the Company, (ii) protect
confidential information of the Company, (iii) retain his expertise
in oil and gas operations, (iv) resolve any claims that may have
arisen during the term of employment, and (v) ensure that Mr. Palko
will not compete against the Company.
D. The Compensation Committee and
Board of Directors of the Company have determined that it is in the
best interests of the Company and its stockholders to enter into
this Agreement.
NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Defined Terms. When used in this
Agreement, the following terms will have the following
meanings:
“Affiliate” means, with
respect to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise)
controls, is controlled by, or is under common control with such
Person. The term “control” (including the terms
“controlled by” and “under common control
with”) means the possession, directly or indirectly, of the
actual power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of stock, by
contract, credit arrangement or otherwise.
“Affiliated Entities”
means XTO Energy Inc. and each of its Subsidiaries and
Affiliates.
“Business Enterprise”
means any corporation, partnership, limited liability company, sole
proprietorship, joint venture, joint stock company, bank,
association, trust, trust company, land trust, business trust or
other business association or entity.
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“Company Oil and Gas
Interests” means all Oil and Gas Interests in which any of
the Affiliated Entities has any ownership, working, income and/or
net profits interest, including without limitation fee or leasehold
interest.
“Competing Business”
means any Oil and Gas Business on or with respect to the
Territory.
“Confidential
Information” means all information relating to the Affiliated
Entities and/or the Company Oil and Gas Interests, including
without limitation information relating to title matters,
environmental matters, financial statements and other financial
matters, the engineering reports reflecting the Company Oil and Gas
Interests, estimates of reserves, quality of reserves, geological
matters, asset listings, production and operating costs, production
capabilities, marketing, tax, forecasts and projections, in
whatever form (whether documentary, computer storage or
other).
“Consulting Fee” shall
have the meaning defined in Section 3.
“Consulting Period”
means the period beginning on the Retirement Date and ending on
October 31, 2006.
“Consulting Services”
shall have the meaning defined in Section 3.
“Derivative Information”
means any notes, summaries, evaluations, analyses and other
material derived by Mr. Palko from any of the Confidential
Information.
“Employment Related
Contracts” means Mr. Palko’s Amended and Restated
Employment Agreement dated May 17, 2000, as amended August 20,
2002, and Employee’s Agreement for Grant of Performance
Shares dated February 20, 2001, as amended October 15,
2004.
“Equity Interest” means
the equity ownership rights in a Business Enterprise, whether in
the form of capital stock, ownership unit, limited liability
company interest, limited or general partnership interest or any
other form of ownership, or any right, option, warrant, convertible
security or indebtedness or other instrument enabling any Person to
acquire any of the same.
“Hydrocarbons” means
oil, condensate, gas, casinghead gas and other liquid or gaseous
hydrocarbons.
“Non-Compete Payment”
shall have the meaning defined in Section 4(d).
“Oil and Gas Business”
means owning, managing, acquiring, attempting to acquire,
soliciting the acquisition of, operating, controlling or developing
Oil and Gas Interests, or engaging in, or being connected with, as
a principal, owner, officer, director, employee, shareholder,
promoter, consultant, contractor, partner, member, joint venturer,
agent, owner of any Equity Interest or in any other capacity
whatsoever, any Business Enterprise engaged in any of the foregoing
activities or in any aspect of the oil and gas exploration and
production business.
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“Oil and Gas Interests”
means (a) direct and indirect interests in or rights with respect
to oil, gas, mineral and related properties (including revenues
therefrom) and assets of any kind and nature, direct or indirect,
including without limitation working, royalty and overriding
royalty interests, mineral interests, leasehold interests,
production payments, operating rights, net profits interests, other
non-working interests and non-operating interests; (b) interests in
or rights with respect to Hydrocarbons or other minerals or
revenues therefrom or contracts or agreements in connection
therewith or claims and rights thereto (including without
limitation oil and gas leases, operating agreements, unitization
and pooling agreements and orders, division orders, transfer
orders, mineral deeds, royalty deeds, oil and gas sales, exchange
and processing contracts and agreements and, in each case,
interests thereunder), surface interests, fee interests,
reversionary interests, reservations and concessions; (c)
easements, rights of way, licenses, permits, leases, and other
interests associated with, appurtenant to, or necessary for the
operation of any of the foregoing; and (d) interests in equipment
and machinery (including without limitation well equipment and
machinery), oil or gas production, gathering, transmission,
compression, treating, processing and storage facilities (including
without limitation tanks, tank batteries, pipelines and gathering
systems), pumps, water plants, electric plants, gasoline and gas
processing plants, refineries and other tangible personal property
and fixtures associated with, appurtenant to, or necessary for the
operation of any of the foregoing, regardless of
location.
“Person” means any
natural person, Business Enterprise or governmental
authority.
“Restricted Group” means
(a) each member of Mr. Palko’s immediate family who lives in
his household, and (b) any Business Enterprise in which Mr. Palko,
any one or more members of Mr. Palko’s immediate family who
lives in his household or Mr. Palko and one or more members of Mr.
Palko’s immediately family who lives in his household
collectively own or have the right to acquire an Equity Interest in
excess of 5%, or otherwise have any right, through the ownership of
a voting interest or otherwise, to direct the activities of such
Business Enterprise.
“Restricted Period”
means the period beginning on the Retirement Date and ending on
October 31, 2006.
“Retirement Benefits”
shall have the meaning defined in Section 7.
“Retirement Date” means
12:01 a.m. May 1, 2005.
“Subsidiary” means, with
respect to any Person, any entity, whether incorporated or
unincorporated, of which at least a majority of the securities or
ownership interests having by their terms voting power to elect a
majority of the board of directors or other persons performing
similar functions is directly or indirectly owned or controlled by
such Person or by one or more of its respective
Subsidiaries.
“Territory” means the
United States of America.
2. Consideration. Mr. Palko has entered into this Agreement and
made the covenants hereinafter set forth (i) in connection with his
retirement from the Company; (ii) in connection
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with the Company’s desire to protect the
Confidential Information; (iii) in connection with the
Company’s agreement to retain Mr. Palko to provide consulting
services to the Company; (iv) to resolve any claims that may have
arisen during the term of Mr. Palko’s employment; and (v) to
ensure that Mr. Palko will not compete against the
Company.
3. Consulting Arrangement.
(a) The Company hereby retains Mr.
Palko effective as of the Retirement Date to render such consulting
and advisory services (the “Consulting Services”) as
the Company may reasonably request from time to time during the
Consulting Period. Mr. Palko hereby accepts such engagement and
agrees to perform Consulting Services upon the terms and conditions
set forth in this Agreement. Mr. Palko shall perform the Consulting
Services at such times and places as an officer designated by the
Company or the Board of Directors of the Company shall from time to
time reasonably request.
(b) As compensation for the
Consulting Services, Mr. Palko shall receive $55,000 per calendar
month plus a monthly amount for expenses described Section 3(c)
below during the Consulting Period for Consulting Services (the
“Consulting Fee”), which shall be paid in accordance
with the customary payroll practices of the Company. During the
initial nine month period, Mr. Palko shall be paid such Consulting
Fee regardless of the Company’s early termination of this
Agreement, unless such termination is due to a breach of this
Section 3 due to Mr. Palko. Any Consulting Fee payment payable to
Mr. Palko hereunder in respect of any calendar month during which
the Consulting Period ends prior to the end of such calendar month
shall be prorated based on the ratio of the number of days in such
calendar month during which Mr. Palko is retained as a consultant
hereunder to the number of days in such calendar month.
(c) Mr. Palko shall receive $10,000
per calendar month as part of the Consulting Fee during the
Consulting Period for the purposes of (i) the use of office space
and office equipment, and (ii) expenses incurred by Mr. Palko in
rendering the Consulting Services during the Consulting Period,
which shall include without limitation travel, lodging, meals, and
car rentals or taxi fares when out of town, long distance telephone
calls to or for the Company, facsimile transmissions charges, and
mailing expenses incurred by Mr. Palko in rendering the Consulting
Services.
(d) Notwithstanding anything in this
Agreement to the contrary, Mr. Palko shall be an independent
contractor in performing the Consulting Services, with authority to
select the means and method of performing the Consulting Services.
Mr. Palko shall not be an employee or agent of the Company, and any
action taken by Mr. Palko that is not authorized by this Agreement
or any other agreement between the Company and Mr. Palko shall not
bind or create any claim against the Company. Unless otherwise
specifically authorized by this Agreement or any other agreement
between the Company and Mr. Palko, Mr. Palko has no authority to
transact any business or make any representations or promises in
the name of the Company.
(e) Notwithstanding anything in this
Agreement to the contrary, the consulting arrangement created by
this Section 3 between the Company and Mr. Palko (i) may be
terminated prior to the expiration of the Consulting Period by
either party for any reason or no
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reason at all; (ii) shall terminate
automatically upon the death of Mr. Palko; and (iii) shall
terminate automatically at the expiration of the Consulting Period.
Termination of the consulting arrangement by either party shall be
evidenced by a written notice given to the other party in
accordance with Section 19, which notice shall specify the
termination date (which date shall not be less than 15 days after
such notice is given). Upon a termination of the consulting
arrangement, neither of the parties hereto shall have any further
duty or obligation under this Section 3; provided, however, that
termination of the consulting arrangement shall not affect the
duties and obligations set forth in the other sections of this
Agreement.
4. Restriction on Activities.
(a) During the Restricted Period,
neither Mr. Palko nor any member of the Restricted Group shall,
without the prior written consent of the Company, directly or
indirectly:
(i) engage in, carry on or assist,
individually or as a principal, owner, officer, director, employee,
shareholder, promoter, consultant, contractor, partner, member,
joint venturer, agent, owner of an Equity Interest, lender or in
any other capacity whatsoever, directly or indirectly, any (A)
Competing Business or (B) Business Enterprise that is otherwise
directly competitive with any Affiliated Entities on or with
respect to the Territory and which derives more than 5% of its
revenues from or has more than 5% of its book value in assets
located in the Territory;
(ii) perform for any Business
Enterprise engaged in a Competing Business any duty Mr. Palko
performed for the Affiliated Entities that involved such
member’s access to, or knowledge or application of,
Confidential Information;
(iii) advise, request, induce or
attempt to induce any customer, supplier, licensee or other
business relation of the Affiliated Entities to curtail, limit or
cease doing business with the Affiliated Entities, or in any way
interfere with the relationship between any such customer,
supplier, licensee or business relation and the Affiliated
Entities;
(iv) other than for the benefit of
the Company pursuant to Mr. Palko’s consulting arrangement
with the Company set forth in Section 3, individually or as a
principal, owner, officer, director, employee, shareholder,
promoter, consultant, contractor, partner, member, joint venturer,
agent, owner of an Equity Interest of more than 2% of (or more than
10% of, as the result of any holdings in a mutual fund, hedge fund
or any other similar fund over which Mr. Palko does not directly or
indirectly control the investments thereof), or in any other
capacity whatsoever with or in, any Business Enterprise, own,
acquire, attempt to acquire or solicit the acquisition of (or
assist any person or Business Enterprise to own, acquire, attempt
to acquire or solicit the acquisition of) (A) any Oil and Gas
Interest on or with respect to the Territory, or (B) any Equity
Interest in any Business Enterprise with any Oil and Gas Interests
on or with respect to the Territory and which derives more than 5%
of its revenues from or has more than 5% of its book value in
assets located in the Territory;
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(v) hire, attempt to hire or contact
or solicit with respect to hiring (A) any Person who is an employee
of the Affiliated Entities, or (B) any Person who was an employee
of the Affiliated Entities within 180 days after such Person ceased
to be so employed, excluding, however, any immediate family member
of Mr. Palko or Mr. Palko’s administrative assistant;
or
(vi) interfere with any of the
Company Oil and Gas Interests or in any way attempt to do any of
the foregoing or assist any other Person to do or attempt to do any
of the foregoing.
(b) Mr. Palko, individually and on
behalf of the Restricted Group, acknowledges that each of the
covenants of Sections 4(a)(i) through 4(a)(vi) are in addition to,
and shall not be construed as a limitation upon, any other covenant
provided in Section 4(a). Mr. Palko, individually and on behalf of
the Restricted Group, agrees that the geographic boundaries, scope
of prohibited activities and time duration of each of the covenants
set forth in Sections 4(a)(i) throu
