Severance Plan - Tom Brown Inc.
TOM BROWN, INC.
THIS SEVERANCE PLAN (the 'Plan') dated as of July 1, 1998 is hereby
adopted pursuant to the authorization of the Board of Directors of Tom Brown,
Inc., a Delaware corporation, for the benefit of its eligible employees under
the following circumstances:
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. Where the following words and phrases appear in
the Plan, they shall have the respective meanings set forth below, unless
their context clearly indicates to the contrary.
(a) 'Asset Acquisition' shall be deemed to have occurred
if any Person, a group or groups of related or unrelated Persons acquires more
than fifty percent (50%) in value of the oil and gas properties of the Company
pursuant to one or more transactions with the Company during the term of this
(b) 'Base Pay' shall mean the annualized base rate of
compensation paid by the Company to a Covered Employee (including amounts which
the Covered Employee could have received in cash had he not elected to
contribute to an employee benefit plan maintained by the Company), excluding
overtime pay, commissions, bonuses, employee benefits, added premiums,
differentials, and all forms of incentive compensation. Base Pay shall be
determined effective as of the date of the Covered Employee's Involuntary
Termination. A 'Week's Base Pay' shall mean Base Pay divided by fifty- two.
(c) 'Beneficial Owner' shall have the meaning set forth
in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in
effect on May 1, 1998.
(d) 'Board' shall mean the Board of Directors of the
(e) 'Change in Control' shall be deemed to have occurred
if (1) any Person is or becomes the Beneficial Owner of securities of the
Company representing twenty percent (20%) or more of the Voting Power, (2)
there shall occur a change in the composition of a majority of the Board within
any period of four (4) consecutive years which change shall not have been
approved by a majority of the Board as constituted immediately prior to such
change in composition, (3) at any meeting of the shareholders of the Company
called for the purpose of electing directors, more than one of the persons
nominated by the Board for election as directors shall fail to be elected, or
(4) the consummation of a merger, consolidation, sale of substantially all of
the assets of the
Company or other reorganization of the Company, other than a reincorporation,
in which the Company does not survive.
(f) 'Committee' shall mean the Compensation Committee of
(g) 'Company' shall mean Tom Brown, Inc. and any
affiliated entity which is a 'Participating Company' hereunder.
(h) 'Covered Employee' shall mean any individual who, on
or after the Effective Date, is a regular, full-time employee of the Company
(not including consultants or temporary, casual or part time employees) other
than an employee who is otherwise covered by a pre-existing severance plan or
is a party to a written agreement with the Company which separately provides
for severance payments or benefits upon such individual's termination of
employment with the Company.
(i) 'Effective Date' shall mean July 1, 1998.
(j) 'Involuntary Termination' shall mean the termination,
on or within two years after the Effective Date, of a Covered Employee's
employment with the Company as a result of or in connection with an Asset
Acquisition or a Change in Control; provided, however, the term 'Involuntary
Termination' shall not include:
(1) a resignation by the Covered Employee;
(2) a Termination for Cause or a termination
other than as a result of or in connection with an Asset Acquisition
or a Change in Control;
(3) a termination as a result of the Covered
(4) any termination as the result of the Covered
Employee's disability under circumstances entitling him to benefits
under the Company's long-term disability plan;
(5) any termination which the Company expects to
be of short duration and pursuant to which the Covered Employee is
subject to recall within a reasonable period of time (as determined by
the Committee); or
(6) any termination occurring as a result of or
in connection with an Asset Acquisition or a Change in Control
pursuant to which the Covered Employee is employed with an affiliate
of the Company or an acquiring or merging company.
(k) 'Person' shall have the meaning set forth in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as in effect on
May 1, 1998.
(l) 'Severance Amount' shall mean an amount equal to two
and one-half (2 1/2) Week's Base Pay for each of such Covered Employee's Years
of Service, but in no event shall such amount be less than twelve Week's Base
(m) 'Termination for Cause' shall mean any termination of
a Covered Employee's employment with the Company by reason of the Covered
Employee's (1) conviction of a felony or a misdemeanor involving moral
turpitude, (2) failure to perform his duties or responsibilities in a manner
satisfactory to the Company, (3) engagement in conduct which is injurious
(monetarily or otherwise) to the Company or any of its affiliates (including,
without limitation, misuse of the Company's or an affiliate's funds or other
property), (4) engagement in business activities which are in conflict with
the business interests of the Company, (5) insubordination or (6) engagement in
conduct which is in violation of the Company's safety rules or standards or
which otherwise causes injury to another employee or any other person.
(n) 'Voting Power' shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
(o) 'Year of Service' shall mean, with respect to a
particular Covered Employee, each year of such Covered Employee's continuous
employment by the Company from his most recent date of hire to the date his
employment is subject to an Involuntary Termination (a partial year shall be
deemed to be a full year for purposes of this definition). If a Covered
Employee's employment is terminated and he is then reemployed under the
circumstances described in Section 1.1(j)(5), then such Covered Employee shall
be deemed to be continuously employed by the Company during the entire period
of such layoff.
1.2 Number and Gender. Wherever appropriate herein, word
used in the singular shall be considered to include the plural and the plural
to include the singular. The masculine gender, where appearing in this Plan,
shall be deemed to include the feminine gender.
1.3 Headings. The headings of Articles and Sections herein are
included solely for convenience and if there is any conflict between such
headings and the text of the Plan, the text shall control.
2.1 Severance Benefits. Subject to the provisions of Section
2.2 hereof, if a Covered Employee's employment by the Company shall be subject
to an Involuntary Termination, then the Covered Employee shall be entitled to
(a) a lump sum cash payment within a reasonable period of
time after his termination of employment in an amount equal to the Severance
Amount. Payments provided herein shall be subject to any required tax
withholding and any employee benefit premiums, and
(b) continued availability, for a period of six months,
of the dental and medical insurance benefits in effect immediately prior to the
date of termination at the same cost to the Covered Employee in effect at such
time. Such dental and medical benefits, however, shall be subject, in the
Company's discretion, to such changes, if any, made thereto in respect of
benefits provided to retained Company employees. The Company shall have no
obligation to continue any other benefits, including, without limitation, life
insurance, accidental death and dismemberment insurance, long-term disability
benefits or any other benefits.
2.2 Release and Full Settlement. As a condition to the receipt of
any severance payment hereunder, the Company, in its sole discretion, may
require a Covered Employee whose employment by the Company has been subject to
an Involuntary Termination to first execute a release, in the form established
by the Company, releasing the Company, its shareholders, partners, officers,
directors, employees and agents from any and all claims and from any and all
causes of action of any kind or character, including but not limited to all
claims or causes of action arising out of such Covered Employee's employment
with the Company or the termination of such employment, and the performance of
the Company's obligations hereunder and the receipt of the benefits provided
hereunder by such Covered Employee shall constitute full settlement of all such
claims and causes of action.
2.3 Mitigation. A Covered Employee shall not be required to
mitigate the amount of any payment provided for in this Article II by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in this Article II be reduced by any compensation or benefit earned by the
Covered Employee as a result of employment by another employer or by retirement
benefits. The benefits under the Plan are in addition to any other benefits to
which a Covered Employee is otherwise entitled.
ADMINISTRATION OF PLAN
3.1 Appointment of Committee. The Plan shall be administered by
the Committee. The members of the Committee shall serve at the pleasure of the
Board and shall administer the Plan on behalf of the Company. At any time
during the term of his office, a member of the Committee may resign by giving
written notice to the Board and the Committee, such resignation to become
effective upon the appointment of a substitute member or, if earlier, the lapse
of thirty days after such notice is given as herein provided.
3.2 Committee Procedure. A majority of the members of the
Committee shall constitute a quorum. Action by the Committee may be taken at a
meeting by a vote of a majority of those present or without a meeting by
unanimous consent in writing of all members. If a majority of Committee
members may not decide a particular issue or take action with respect to the
Plan because of the application of Section 3.4, the Board shall take such
action or decide such matter. The Committee shall also designate the person or
persons who shall be authorized to sign for the Committee and, upon such
designation, the signature of such person or persons shall bind the Committee.
3.3 Committee's Powers and Duties. It shall be a principal duty
of the Committee to see that the Plan is carried out, in accordance with its
terms, for the exclusive benefit of persons entitled to participate in the
Plan. The Committee shall be the named fiduciary and shall have full power to
administer the Plan in all of its details, subject to applicable requirements
of law. For this purpose, the Committee's powers shall include, but not be
limited to, the following authority, in addition to all other powers provided
by this Plan:
(a) to make and enforce such rules and regulations as it
deems necessary or proper for the efficient administration of the
(b) to interpret the Plan, its interpretation thereof to
be final and conclusive on all persons claiming benefits under the
(c) to decide all questions concerning the Plan and the
eligibility of any person to participate in the Plan;
(d) to make a determination as to the right of any person
to a benefit under the Plan (including, without limitation, to
determine whether and when there has been a termination of a Covered
Employee's employment and the cause of such termination);
(e) to appoint such agents, counsel, accountants,
consultants, claims administrator and other persons as may be required
to assist in administering the Plan;
(f) to allocate and delegate its responsibilities under
the Plan and to designate other persons to carry out any of its
responsibilities under the Plan, any such allocation, delegation or
designation to be in writing;
(g) to sue or cause suit to be brought in the name of the
(h) to obtain from the Company and from Covered Employees
such information as is necessary for the proper administration of the
3.4 Member's Own Participation. No Covered Employee or agent of
the Committee may act, vote, or otherwise influence a decision of the Committee
specifically relating to himself as a participant in the Plan.
3.5 Indemnification of Committee. The Company agrees to indemnify
and to defend to the fullest extent permitted by law any member of the
Committee against all liabilities, damages, costs and expenses (including
attorneys' fees and amounts paid in settlement of any claims approved by the
Company) occasioned by any act or omission to act in connection with the Plan,
if such act or omission was in good faith.
3.6 Compensation, Bond and Expenses. The members of the Committee
shall not receive compensation with respect to their services in respect of the
Plan. To the extent required by applicable law, but not otherwise, Committee
members shall furnish bond or security for the performance of their duties
hereunder. Any expenses properly incurred by the Committee incident to the
administration, termination or protection of the Plan, including the cost of
furnishing bond, shall be paid by the Company.
3.7 Claims Review. In any case in which a Covered Employee's
claim for Plan benefits is denied or modified, the Committee shall:
(a) state the specific reason or reasons for the denial
(b) provide specific reference to pertinent Plan
provisions on which the denial or modification is based;
(c) provide a description of any additional material or
information necessary for the Covered Employee or his representative
to perfect the claim and an explanation of why such material or
information is necessary; and
(d) explain the Plan's claim review procedure as
In the event the request is denied or modified, if the Covered Employee or his
representative desires to have such denial or modification reviewed, he must,
within sixty days following receipt of the notice of such denial or
modification, submit a written request for review by the Committee of its
initial decision. Within sixty days following such request for review the
Committee shall, after providing a full and fair review, render its final
decision in writing to the Covered Employee or his representative stating
specific reasons for such decision. If special circumstances require an
extension of such sixty-day period, the Committee's decision shall be rendered
as soon as possible, but not later than 120 days after receipt of the request
for review. If an extension of time for review is required, written notice of
the extension shall be furnished to the Covered Employee or representative
prior to the commencement of the extension period.
4.1 Funding. The benefits provided herein shall be unfunded and
shall be provided from the Company's general assets.
4.2 Cost of Plan. The entire cost of the Plan shall be borne by
the Company and no contributions shall be required of the Covered Employees.
4.3 Plan Year. The initial Plan year shall be from July 1, 1998
through December 31, 1998. Thereafter, the Plan shall operate on a plan year
consisting of the twelve consecutive month period commencing on January 1 of
4.4 Amendment and Termination. The Plan may be amended from time
to time, or terminated and discontinued, at any time, in each case at the
discretion of the Board.
4.5 Other Adopting Entities. It is contemplated that affiliates
of the Company may adopt this Plan and thereby become a 'Participating Company'
hereunder. Any such entity, whether or not presently existing, may become,
upon approval of the Board, a party hereto by appropriate action of its board
of directors or noncorporate counterpart. The provisions of the Plan shall
apply separately and equally to each Participating Company and its employees in
the same manner as is expressly provided for the Company and its employees,
except that the power to affect the Committee and the power to amend or
terminate the Plan shall be exercised by the Board alone. Nevertheless, any
Participating Company may, with the consent of the Board, incorporate in its
adoption agreement or in an amendment document specific provisions relating to
the operation of the Plan, and such provisions shall become a part of the Plan
as to such Participating Company only. Transfer of employment among the
Company and Participating Companies (and among any of their affiliates) shall
not be considered an Involuntary Termination hereunder. Any Participating
Company may, by appropriate action of its board of directors or noncorporate
counterpart, terminate its participation in the Plan. Moreover, the Board may,
in its discretion, terminate a Participating Company's Plan participation at
4.6 Not Contract of Employment. The adoption and maintenance of
the Plan shall not be deemed to be a contract of employment between the Company
and any person or to be consideration for the employment of any person.
Nothing herein contained shall be deemed to give any person the right to be
retained in the employ of the Company or to restrict the right of the Company
to discharge any person at any time nor shall the Plan be deemed to give the
Company the right to require any person to remain in the employ of the Company
or to restrict any person's right to terminate his employment at any time.
4.7 Severability. Any provision in the Plan that is prohibited or
unenforceable in any jurisdiction by reason of applicable law shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating or affecting the remaining provisions
hereof, and any such prohibitions or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
4.8 Nonalienation. Covered Employees shall not have any right to
pledge, hypothecate, anticipate or assign benefits or rights under the Plan,
except by will or the laws of descent and distribution.
4.9 Governing Law. THE PLAN SHALL BE INTERPRETED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT PREEMPTED
BY FEDERAL LAW.