OUTSIDE DIRECTORS SEVERANCE PLAN

 

 

 

WHEREAS, the Board of Directors of XTO Energy Inc., a Delaware corporation (the “Company”) recognizes that the current business environment makes it difficult to attract and retain highly qualified outside directors; and

 

WHEREAS, the Company recognizes that its outside directors will be significantly involved in evaluating or negotiating any offers, proposals, or other transactions which could result in a change in control of the Company and believes that it is in the best interest of the Company and its stockholders for such outside directors to be in a position, free from personal financial considerations, to assess objectively and pursue aggressively the interests of the Company and its stockholders in making such evaluations and carrying on such negotiations;

 

NOW, THEREFORE, in order to fulfill the above purposes, the following plan has been developed and is hereby adopted.

 

 

Effective as of August 20, 2002 (the “Effective Date”), the Company hereby establishes a severance compensation plan known as the XTO Energy Inc. Outside Directors Severance Plan, as set forth in this document.

 

 

As used herein, the following words and phrases shall have the following respective meanings unless the context clearly indicates otherwise.

 

2.1    Board.    The Board of Directors of the Company.

 

2.2    Cash Retainer.    The annual cash retainer in effect immediately prior to a Change in Control that is paid to the Outside Director for the Outside Director’s performance of services to the Company in the capacity of an Outside Director.

 

2.3    Change in Control.    A “Change in Control” shall mean any one of the following:

 

(a)    “Continuing Directors” no longer constitute a majority of the Board; the term “Continuing Director” means any individual who is a member of the Board on the Effective Date or was nominated for election as a director by, or whose nomination as a director was approved by, the Board with the affirmative vote of a majority of the Continuing Directors;

1

 

(b)    any person or group of persons (as defined in Rule 13d-5 under the Securities Exchange Act of 1934, as amended (“Exchange Act”) together with such person’s or group’s affiliates, becomes the beneficial owner, directly or indirectly, of 25% or more of the voting power of the Company’s then outstanding securities entitled generally to vote for the election of the Company’s directors;

 

(c)    the merger or consolidation to which the Company is a party if the shareholders of the Company immediately prior to the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of less than 50% of the combined voting power to vote for the election of directors of the surviving corporation or other entity following the effective date of such merger or consolidation; or

 

(d)    the sale of all or substantially all of the assets of the Company.

 

Notwithstanding the foregoing provisions of this Section 2.3, if an Outside Director’s services as an Outside Director are involuntary terminated prior to the date on which a Change in Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with a Change in Control, then for all purposes hereof, such termination shall be deemed to have occurred immediately following a Change in Control.

 

2.4    Company.    XTO Energy Inc., a Delaware corporation.

 

2.5    Outside Director.    A member of the Board or an advisory member of the Board who is not an employee of the Company.

 

2.6    Plan.    This XTO Energy Inc. Outside Directors Severance Plan, as amended from time to time.

 

2.7    Performance Share Value.    The number of performance shares most recently granted to each director as part of their annual compensation pursuant to the XTO Energy Inc. 1998 Stock Incentive Plan, or any successor or replacement plan, multiplied by the closing price of the Company’s common stock on the day on which a Change in Control occurs (or, if such common stock is not traded on the day the Change in Control occurs, on the day on which such common stock last traded prior to the Change in Control).

 

 

3.1    Right to Payment.    Upon a Change in Control an Outside Director shall be entitled to receive and the Company shall pay the Outside Director a severance payment in an amount equal to three times the sum of the Outside Director’s Cash Retainer and the Performance Share Value.

 

3.2    Form and Time of Payment.    The severance payment described in Section 3.1 hereof shall be paid to the Outside Director in a lump sum in cash less applicable tax withholding within thirty days after the date of a Change in Control.

2

 

 

This Plan shall bind any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, in the same manner and to the same extent that the Company would be obligated under this Plan if no succession had taken place. In the case of any transaction in which a successor would not, by the foregoing provision or by operation of law, be bound by this Plan, the Company shall require such successor expressly and unconditionally to assume and agree to perform the Company’s obligations under this Plan in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession where such successor would not otherwise be bound by this Plan shall be a breach hereof and shall entitle Outside Directors to compensation from the Company in the same amount and on the same terms as such Outside Directors would be entitled hereunder if the service of such Outside Directors were involuntarily terminated as directors or advisory directors on the date immediately after the date of the Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the date of termination. As used herein, the “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Article IV or which otherwise becomes bound by all the terms and provisions hereof by operation of law.

 

 

5.1    Duration.    This Plan shall continue in effect until terminated in accordance with Section 5.2. If a Change in Control occurs, this Plan shall continue in full force and effect, and shall not terminate or expire, until the later of (a) thirty days after the date of such Change in Control, or (b) the date on which all Outside Directors who have become entitled to a severance benefit hereunder have received all of such benefits in full.

 

5.2    Amendment and Termination.    The Plan may be terminated or amended in any respect by resolution adopted by two-thirds of the Board; provided, however, that no such amendment or termination of the Plan may be made if such amendment or termination would adversely affect any right of an Outside Director who became an Outside Director prior to the later of (a) the date of adoption of any such amendment or termination, or (b) the effective date of any such amendment or termination; and, provided further, that the Plan no longer shall be subject to amendment, change, substitution, deletion, revocation, or termination in any respect whatsoever following a Change in Control.

3

 

 

6.1    Outside Director’s Legal Expenses.    To the extent permitted by law, the Company agrees to pay, upon written demand therefor by the Outside Director, all legal fees and expenses which the Outside Director may reasonably incur as a result of any dispute or contest (regardless of the outcome thereof) by or with the Company or others regarding the validity or enforceability of, or liability under, any provision hereof, plus in each case interest at the “applicable Federal rate” (as defined in Section 1274(d) of the Internal Revenue Code). In any such action brought by an Outside Director for damages or to enforce any provisions hereof, the Outside Director shall be entitled to seek both legal and equitable relief and remedies, including, without limitation, specific performance of the Company’s obligations hereunder, in the Outside Director’s sole discretion.

 

6.2    Validity and Severability.    The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision of the Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

6.3    The Outside Director’s Heirs, etc.    This Agreement shall inure to the benefit of and be enforceable by the Outside Director’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Outside Director should die while any amounts would still be payable to him or her hereunder as if the Outside Director had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms hereof to the Outside Director’s designee or, if there be no such designee, to the Outside Director’s estate.

 

6.4    Governing Law.    The validity, interpretation, construction and performance of the Plan shall in all respects be governed by the laws of the State of Texas.

 

IN WITNESS WHEREOF, XTO Energy Inc. has caused these presents to be executed by its duly authorized officer on the 20th day of August, 2002.

 

XTO ENERGY INC.
By:		VAUGHN O. VENNERBERG, II
Name:		Vaughn O. Vennerberg, II
Title:		Executive Vice President-Administration

4