-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AoyFPbrdbRSG6E9DX3o8uQIOOuEQaMs3QxJBl2kPIaN09lNoEeNqvzeiUu6PKy8I 35+ZHHum0AJNxpWORR5BTA== 0000950152-96-005670.txt : 19961106 0000950152-96-005670.hdr.sgml : 19961106 ACCESSION NUMBER: 0000950152-96-005670 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961105 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELDEN & BLAKE CORP /OH/ CENTRAL INDEX KEY: 0000880114 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 341686642 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20100 FILM NUMBER: 96654411 BUSINESS ADDRESS: STREET 1: 5200 STONEHAM RD STREET 2: P O BOX 2500 CITY: NORTH CANTON STATE: OH ZIP: 44720 BUSINESS PHONE: 2164991660 MAIL ADDRESS: STREET 1: 5200 STONEHAM RD STREET 2: P O BOX 2500 CITY: NORTH CANTON STATE: OH ZIP: 44720 10-Q 1 BELDEN & BLAKE CORPORATION 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________________to ______________________ Commission File Number: 0-20100 BELDEN & BLAKE CORPORATION - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-1686642 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5200 Stoneham Road North Canton, Ohio 44720 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (330) 499-1660 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Number of common shares of Belden & Blake Corporation Outstanding as of October 31, 1996 11,169,081 2 BELDEN & BLAKE CORPORATION INDEX - --------------------------------------------------------------------------------
Page ---- PART I Financial Information: - ------ Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1996 and 1 December 31, 1995 Consolidated Statements of Operations for the three and 3 nine months ended September 30, 1996 and 1995 Consolidated Statements of Shareholders' Equity for the 4 nine months ended September 30, 1996 and the years ended December 31, 1995 and 1994 Consolidated Statements of Cash Flows for the nine 5 months ended September 30, 1996 and 1995 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition 7 and Results of Operations PART II Other Information - ------- Item 6. Exhibits and Reports on Form 8-K 15
3 BELDEN & BLAKE CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands)
SEPTEMBER 30, DECEMBER 31, 1996 1995 ================ ================ (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 11,293 $ 12,322 Accounts receivable, net 28,534 28,123 Inventories 9,575 9,253 Deferred income taxes 2,771 2,254 Other current assets 1,170 2,198 ---------------- ---------------- Total current assets 53,343 54,150 PROPERTY AND EQUIPMENT Oil and gas properties (successful efforts method) 255,395 235,344 Gas gathering systems 25,842 25,416 Land, buildings, machinery and equipment 30,529 29,977 ---------------- ---------------- 311,766 290,737 Less accumulated depreciation, depletion and amortization 79,526 59,209 ---------------- ---------------- PROPERTY AND EQUIPMENT, NET 232,240 231,528 OTHER ASSETS 10,817 11,620 ---------------- ---------------- $ 296,400 $ 297,298 ================ ================
The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes generally required by generally accepted accounting principles for complete financial statements. See accompanying notes. 1 4 BELDEN & BLAKE CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
SEPTEMBER 30, DECEMBER 31, 1996 1995 ================ ================ (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 7,941 $ 11,004 Accrued expenses 20,651 23,811 Current portion of long-term liabilities 4,337 1,976 ---------------- ---------------- Total current liabilities 32,929 36,791 LONG-TERM LIABILITIES Bank and other long-term debt 60,204 67,223 Senior notes 31,111 35,000 Convertible subordinated debentures 6,800 6,800 Other 1,451 1,500 ---------------- ---------------- 99,566 110,523 DEFERRED INCOME TAXES 11,042 7,693 SHAREHOLDERS' EQUITY Common stock without par value; $.10 stated value per share; authorized 50,000,000 shares; issued and outstanding 11,169,081 and 11,136,496 shares 1,117 1,114 Preferred stock without par value; $100 stated value per share; authorized 8,000,000 shares; issued and outstanding 24,000 shares 2,400 2,400 Paid in capital 126,712 126,063 Retained earnings 22,698 12,820 Unearned portion of restricted stock (64) (106) ---------------- ---------------- TOTAL SHAREHOLDERS' EQUITY 152,863 142,291 ---------------- ---------------- $ 296,400 $ 297,298 ================ ================
The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes generally required by generally accepted accounting principles for complete financial statements. See accompanying notes. 2 5 BELDEN & BLAKE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited)
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1996 1995 1996 1995 ============== ============== ============== ============== REVENUES Oil and gas sales $ 19,075 $ 12,949 $ 57,265 $ 31,924 Gas marketing and gathering 9,835 9,212 31,624 26,916 Oilfield sales and service 7,661 6,200 18,583 12,455 Interest and other 813 1,674 2,554 2,088 -------------- -------------- -------------- -------------- 37,384 30,035 110,026 73,383 EXPENSES Production expense 4,712 3,725 13,197 8,263 Production taxes 748 659 2,259 1,432 Cost of gas and gathering expense 8,221 7,507 26,348 22,759 Oilfield sales and service 6,832 5,587 16,984 11,654 Exploration expense 1,548 1,579 4,421 3,392 General and administrative expense 1,193 1,052 3,806 3,066 Interest expense 1,763 1,561 5,587 4,013 Depreciation, depletion and amortization 7,240 5,469 21,941 12,845 -------------- -------------- -------------- -------------- 32,257 27,139 94,543 67,424 -------------- -------------- -------------- -------------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 5,127 2,896 15,483 5,959 Provision for income taxes 1,502 1,063 5,031 2,195 -------------- -------------- -------------- -------------- INCOME FROM CONTINUING OPERATIONS 3,625 1,833 10,452 3,764 LOSS FROM DISCONTINUED OPERATIONS (439) (678) (439) (954) -------------- -------------- -------------- -------------- NET INCOME $ 3,186 $ 1,155 $ 10,013 $ 2,810 ============== ============== ============== ============== PER COMMON SHARE: CONTINUING OPERATIONS $ 0.32 $ 0.18 $ 0.92 $ 0.45 DISCONTINUED OPERATIONS (0.04) (0.07) (0.04) (0.12) -------------- -------------- -------------- -------------- NET INCOME $ 0.28 $ 0.11 $ 0.88 $ 0.33 ============== ============== ============== ============== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 11,171 9,741 11,168 7,993 ============== ============== ============== ==============
See accompanying notes. 3 6
BELDEN & BLAKE CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands) UNEARNED COMMON COMMON PREFERRED PAID IN RETAINED RESTRICTED SHARES STOCK STOCK CAPITAL EARNINGS STOCK TOTAL ======== =========== =========== ============ ========== =========== ============= JANUARY 1, 1994 7,053 $ 706 $ 2,400 $ 69,865 $ 4,216 $ (330) $ 76,857 Stock issued 32 3 385 388 Net income 3,843 3,843 Preferred stock dividend (180) (180) Restricted stock 129 105 234 - -------------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1994 7,085 709 2,400 70,379 7,879 (225) 81,142 Stock issued 4,028 403 55,264 55,667 Net income 5,121 5,121 Preferred stock dividend (180) (180) Stock options exercised 2 -- 25 25 Employee stock bonus 22 2 251 253 Restricted stock 144 119 263 - -------------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1995 11,137 1,114 2,400 126,063 12,820 (106) 142,291 Net income 10,013 10,013 Preferred stock dividend (135) (135) Stock options exercised 2 -- 31 31 Employee stock bonus 26 2 419 421 Restricted stock 4 1 195 42 238 Other 4 4 - -------------------------------------------------------------------------------------------------------------------- (UNAUDITED) SEPTEMBER 30, 1996 11,169 $ 1,117 $ 2,400 $ 126,712 $ 22,698 $ (64) $ 152,863 ====================================================================================================================
See accompanying notes. 4 7
BELDEN & BLAKE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) NINE MONTHS ENDED SEPTEMBER 30 -------------------------------------- 1996 1995 ---------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 10,013 $ 2,810 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 21,941 13,261 Loss on disposal of property and equipment 393 183 Deferred income taxes 2,832 1,140 Deferred compensation and stock grants 840 790 Change in operating assets and liabilities, net of effects of purchases of businesses: Accounts receivable and other operating assets 791 (11,237) Inventories (322) 943 Accounts payable and accrued expenses (1,449) 7,009 ---------------- ----------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 35,039 14,899 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (4,490) (90,098) Proceeds from property and equipment disposals 2,128 183 Additions to property and equipment (24,269) (14,042) Increase in other assets (500) (1,076) ---------------- ----------------- NET CASH USED IN INVESTING ACTIVITIES (27,131) (105,033) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving line of credit and long-term debt 12,105 66,000 Repayment of long-term debt and other obligations (20,907) (17,268) Proceeds from sale of common stock -- 59,438 Common stock placement cost -- (3,579) Preferred stock dividends (135) (135) ---------------- ----------------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (8,937) 104,456 ---------------- ----------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,029) 14,322 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 12,322 3,649 ---------------- ----------------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 11,293 $ 17,971 ================ ================= CASH PAID DURING THE PERIOD FOR: INTEREST $ 6,472 $ 3,936 INCOME TAXES 1,069 599 NON-CASH INVESTING AND FINANCING ACTIVITIES: Acquisition of assets in exchange for long-term obligations -- 15,394
See accompanying notes. 5 8 BELDEN & BLAKE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (UNAUDITED) SEPTEMBER 30, 1996 - ------------------------------------------------------------------------------- (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Belden & Blake Corporation (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 1995. (2) ACQUISITIONS In July 1996, the Company acquired working interests averaging 40% in 17 producing wells, four proved undeveloped locations and 7,000 undeveloped leasehold acres in Ohio from North American Gas Investment Trust for $1.2 million. The Company operates the wells and owns the remaining working interests. The interests acquired had estimated proved developed reserves of 0.6 Bcf (billion cubic feet) of natural gas and 53,000 Bbls (barrels) of oil at January 1, 1996. In August 1996, the Company acquired working interests in 209 wells in Ohio from various NYLife Energy Investors partnerships for $2.5 million. The Company has operated the wells on behalf of the NYLife partnerships since 1990. The interests acquired had estimated proved developed reserves of 3.5 Bcf of natural gas and 152,000 Bbls of oil at July 1, 1996. In September 1996, the Company acquired a 100% working interest in 97 natural gas wells and a 23 mile, ten inch pipeline in the Shrewsbury Field located in northwestern Kentucky for $560,000. The wells had estimated proved developed gas reserves at July 1, 1996, of 1.9 Bcf. (3) CHANGE IN ACCOUNTING PRINCIPLE In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company adopted Statement 121 in the first quarter of 1996. The Company's estimate of undiscounted cash flows indicated that such carrying amounts of assets are expected to be recovered. However, it is possible that the estimates may change in the future resulting in the write-down of assets to fair value. 6 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) ------------------------------------------------------ (4) SALE OF TAX CREDIT PROPERTIES In February and March 1996, the Company sold certain interests that qualify for the nonconventional fuel source tax credit. The interests were sold in two separate transactions for approximately $750,000 and $100,000, respectively, in cash and a volumetric production payment under which 100% of the cash flow from the properties will go to the Company until approximately 11.7 Bcf and 3.4 Bcf, respectively, of gas has been produced and sold. In addition to receiving 100% of the cash flow from the properties, the Company will receive quarterly incentive payments based on production from the interests. The Company has the option to repurchase the interests at a future date. (5) HEDGING ACTIVITIES As a result of certain 1995 acquisitions, the Company has several contracts to sell gas at indexed prices. The Company may, from time to time, partially hedge these contract prices by selling futures contracts on the NYMEX. The Company began partially hedging its gas price exposure in January 1996. For the first half of 1996, the Company incurred a $258,000 pretax loss on its hedging activities due to rapidly rising gas prices during the period. At September 30, 1996, the Company did not have any open futures contracts. (6) DISCONTINUED OPERATIONS The Company made the decision to sell Engine Power Systems, Inc. (EPS), a wholly-owned subsidiary, in September 1995. To date, the Company has been unsuccessful finding a buyer for EPS despite an active marketing effort. In September 1996, the Company revised its estimate of the loss on discontinuance of EPS and recognized an additional charge of $675,000 ($439,000 net of tax benefit) to write-down various assets and inventories to estimated realizable value and to establish a provision for estimated costs of asset disposals and future losses related to EPS. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- RESULTS OF OPERATIONS - THIRD QUARTERS OF 1996 AND 1995 COMPARED OIL AND GAS SALES. Oil and gas sales increased $6.1 million (47%) in the third quarter of 1996 compared to the same period of 1995 due to an increase in oil and gas volumes sold and a higher average price paid for the Company's oil and gas. Oil volumes increased 16,000 Bbls (10%) from 165,000 Bbls in the third quarter of 1995 to 181,000 Bbls in the third quarter of 1996 resulting in an increase in oil sales of approximately $265,000. Gas volumes increased 1.4 Bcf (29%) from 4.9 Bcf in the third quarter of 1995 to 6.3 Bcf in the third quarter of 1996 resulting in an increase in gas sales of approximately $3.0 million. These volume increases were primarily due to production from properties acquired and wells drilled in 1995 and 1996. The average price paid for the Company's oil increased from $16.27 per barrel in the third quarter of 1995 to $20.14 per barrel in the third quarter of 1996 which increased oil sales by approximately $700,000. The average price paid for the Company's natural gas increased $.35 per Mcf 7 10 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS (CONTINUED) --------------------------------- (thousand cubic feet) to $2.46 per Mcf in the third quarter of 1996 compared to the third quarter of 1995 which increased gas sales in the third quarter of 1996 by approximately $2.2 million. GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering revenue increased $623,000 (7%) from $9.2 million in the third quarter of 1995 to $9.8 million in the third quarter of 1996 due to an increase in the volume of gas purchased from third parties and resold, an increase in the average selling price of gas and an increase in gas gathering revenues. OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue increased $1.5 million (24%) from $6.2 million in the third quarter of 1995 to $7.7 million in the third quarter of 1996. This increase was primarily due to increased third party oilfield service revenue. INTEREST AND OTHER REVENUE. Interest and other revenue decreased $861,000 (51%) from $1.7 million in the third quarter of 1995 to $813,000 in the third quarter of 1996 due to the recognition in the third quarter of 1995 of anticipated proceeds from contract rejection claims that were filed in the bankruptcy proceedings of Columbia Gas Transmission Corporation partially offset by income in 1996 from incentive production payments associated with certain properties operated by Ward Lake. PRODUCTION EXPENSE. Production expense increased $1.0 million (26%) from $3.7 million in the third quarter of 1995 to $4.7 million in the third quarter of 1996. This increase was largely due to the increased production discussed above. The average production cost in the third quarter of 1995 and 1996 remained consistent at $.64 per Mcfe (equivalent Mcf of natural gas). PRODUCTION TAXES. Production taxes increased $89,000 (14%) from $659,000 in the third quarter of 1995 to $748,000 in the third quarter of 1996. This increase was primarily due to the increased production volumes discussed above. COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense increased $714,000 (10%) from $7.5 million in the third quarter of 1995 to $8.2 million in the third quarter of 1996 due to an increase in volumes of gas purchased from third parties and an increase in the cost of gas. OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense increased $1.2 million (22%) from $5.6 million in the third quarter of 1995 to $6.8 million in the third quarter of 1996 primarily as a result of the increased cost of goods sold associated with the increased sales described above. EXPLORATION EXPENSE. Exploration expense in the third quarter of 1996 was consistent with the third quarter of 1995. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased $141,000 (13%) from $1.1 million in the third quarter of 1995 to $1.2 million in the third quarter of 1996 primarily due to an increase in franchise taxes and an increase in estimated profit sharing and bonuses for 1996. INTEREST EXPENSE. Interest expense increased $202,000 (13%) from $1.6 million in the third quarter of 1995 to $1.8 million in the third quarter of 1996. This increase was primarily due to higher average debt balances incurred to finance the 1995 acquisitions. 8 11 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------ DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and amortization increased by $1.7 million (32%) from $5.5 million in the third quarter of 1995 to $7.2 million in the third quarter of 1996. Depletion expense increased $1.3 million (31%) from $4.2 million in the third quarter of 1995 to $5.5 million in the third quarter of 1996. This increase was primarily due to the increased production volumes described above. Depletion per Mcfe increased from $.72 per Mcfe in the third quarter of 1995 to $.75 per Mcfe in the third quarter of 1996. This increase was primarily the result of proved reserves added through acquisitions and drilling at a higher cost per Mcfe. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from continuing operations before income taxes increased $2.2 million (77%) from $2.9 million in the third quarter of 1995 to $5.1 million in the third quarter of 1996. The operating income from the oil and gas operations segment increased $1.7 million (47%) from $3.8 million in the third quarter of 1995 to $5.5 million in the third quarter of 1996. The increase was attributable to the items discussed above. The operating income from the oilfield sales and service segment increased $190,000 (55%) from $348,000 in the third quarter of 1995 to $538,000 in the third quarter of 1996. INCOME FROM CONTINUING OPERATIONS. Income from continuing operations increased $1.8 million (98%) from $1.8 million in the third quarter of 1995 to $3.6 million in the third quarter of 1996. This increase in income from continuing operations was primarily the result of the items discussed above. Provision for income taxes from continuing operations increased $439,000 (41%) from $1.1 million in the third quarter of 1995 to $1.5 million in the third quarter of 1996. This increase was attributable to an increase in income from continuing operations before income taxes partially offset by a decrease in the effective tax rate. Income from continuing operations on a per share basis increased from $.18 per share in the third quarter of 1995 to $.32 per share in the third quarter of 1996. This increase was primarily the result of the factors discussed above. LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations was $1.1 million ($678,000 net of tax benefit or $.07 per share) in the third quarter of 1995 compared to $675,000 ($439,000 net of tax benefit or $.04 per share) in the third quarter of 1996. In September 1996, the Company revised its estimate of the loss on discontinuance of EPS and recognized an additional charge to write-down various assets and inventories to estimated realizable value and to establish a provision for estimated costs of asset disposals and future losses related to EPS. RESULTS OF OPERATIONS - NINE MONTHS OF 1996 AND 1995 COMPARED OIL AND GAS SALES. Oil and gas sales increased $25.3 million (79%) in the first nine months of 1996 compared to the same period of 1995 due to an increase in oil and gas volumes sold and a higher average price paid for the Company's oil and gas. Oil volumes increased 132,000 Bbls (32%) from 407,000 Bbls in the first nine months of 1995 to 539,000 Bbls in the first nine months of 1996 resulting in an increase in oil sales of approximately $2.2 million. Gas volumes increased 7.5 Bcf (68%) from 11.1 Bcf in the first nine months of 1995 to 18.6 Bcf in the first nine months of 1996 resulting in an increase in gas sales of approximately $17.0 million. These volume increases were primarily due to production from properties acquired and wells drilled in 1995 and 1996. 9 12 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------- The average price paid for the Company's oil increased from $16.83 per barrel in the first nine months of 1995 to $19.44 per barrel in the first nine months of 1996 which increased oil sales by approximately $1.4 million. The average price paid for the Company's natural gas increased $.25 per Mcf to $2.51 per Mcf in the first nine months of 1996 compared to the first nine months of 1995 which increased gas sales in the first nine months of 1996 by approximately $4.7 million. GAS MARKETING AND GATHERING REVENUE. Gas marketing and gathering revenue increased $4.7 million (17%) from $26.9 million in the first nine months of 1995 to $31.6 million in the first nine months of 1996 due to an increase in the volume of gas marketed, an increase in the average selling price of gas and an increase in gas gathering revenues. OILFIELD SALES AND SERVICE REVENUE. Oilfield sales and service revenue increased $6.1 million (49%) from $12.5 million in the first nine months of 1995 to $18.6 million in the first nine months of 1996. This increase was primarily due to the sales generated by the three oilfield sales and service companies acquired by the Company in 1995 and increased third party oilfield service revenue. INTEREST AND OTHER REVENUE. Interest and other revenue increased $466,000 (22%) from $2.1 million in the first nine months of 1995 to $2.6 million in the first nine months of 1996 primarily due to the recognition of income in 1996 from incentive production payments associated with certain properties operated by Ward Lake partially offset by the recognition in the third quarter of 1995 of anticipated proceeds from contract rejection claims that were filed in the bankruptcy proceedings of Columbia Gas Transmission Corporation. PRODUCTION EXPENSE. Production expense increased $4.9 million (60%) from $8.3 million in the first nine months of 1995 to $13.2 million in the first nine months of 1996. This increase was largely due to the increased production discussed above. The average production cost in the first nine months of 1996 was $.60 per Mcfe compared to $.61 per Mcfe in the first nine months of 1995. PRODUCTION TAXES. Production taxes increased $827,000 (58%) from $1.4 million in the first nine months of 1995 to $2.3 million in the first nine months of 1996. This increase was primarily due to the increased production volumes discussed above. COST OF GAS AND GATHERING EXPENSE. Cost of gas and gathering expense increased $3.5 million (16%) from $22.8 million in the first nine months of 1995 to $26.3 million the first nine months of 1996 due to an increase in volumes of gas purchased and an increase in the cost of gas. OILFIELD SALES AND SERVICE EXPENSE. Oilfield sales and service expense increased $5.3 million (46%) from $11.7 million in the first nine months of 1995 to $17.0 million in the first nine months of 1996 primarily as a result of the increased cost of goods sold associated with increased sales resulting from the acquisitions described above. EXPLORATION EXPENSE. Exploration expense increased $1.0 million (30%) from $3.4 million in the first nine months of 1995 to $4.4 million in the first nine months of 1996 primarily due to higher levels of geological, geophysical and leasing activity and increases in the size of the technical staff in conjunction with increased drilling activity. 10 13 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ------------------------------------------------------------ AND RESULTS OF OPERATIONS (CONTINUED) ------------------------------------- GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense increased $740,000 (24%) from $3.1 million in the first nine months of 1995 to $3.8 million in the first nine months of 1996 primarily due to an increase in franchise taxes and an increase in estimated profit sharing and bonuses for 1996. INTEREST EXPENSE. Interest expense increased $1.6 million (39%) from $4.0 million in the first nine months of 1995 to $5.6 million in the first nine months of 1996. This increase was primarily due to higher average debt balances incurred to finance the 1995 acquisitions. DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and amortization increased by $9.1 million (71%) from $12.8 million in the first nine months of 1995 to $21.9 million in the first nine months of 1996. Depletion expense increased $7.3 million (75%) from $9.6 million in the first nine months of 1995 to $16.9 million in the first nine months of 1996. This increase was primarily due to the increased production volumes described above. Depletion per Mcfe increased from $.71 per Mcfe in the first nine months of 1995 to $.77 per Mcfe in the first nine months of 1996. This increase was primarily the result of proved reserves added through acquisitions and drilling at a higher cost per Mcfe. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES. Income from continuing operations before income taxes increased $9.5 million (160%) from $6.0 million in the first nine months of 1995 to $15.5 million in the first nine months of 1996. The operating income from the oil and gas operations segment increased $8.7 million (95%) from $9.1 million in the first nine months of 1995 to $17.8 million in the first nine months of 1996. The increase was attributable to the items discussed above. The operating income from the oilfield sales and service segment increased $613,000 (515%) from $119,000 in the first nine months of 1995 to $732,000 in the first nine months of 1996. INCOME FROM CONTINUING OPERATIONS. Income from continuing operations increased $6.7 million (178%) from $3.8 million in the first nine months of 1995 to $10.5 million in the first nine months of 1996. This increase in income from continuing operations was primarily the result of the items discussed above. Provision for income taxes from continuing operations increased $2.8 million (129%) from $2.2 million in the first nine months of 1995 to $5.0 million in the first nine months of 1996. This increase was attributable to an increase in income from continuing operations before income taxes partially offset by a decrease in the effective tax rate. Income from continuing operations on a per share basis increased from $.45 per share in the first nine months of 1995 to $.92 per share in the first nine months of 1996. This increase was primarily the result of the factors discussed above. LOSS FROM DISCONTINUED OPERATIONS. Loss from discontinued operations was $1.5 million ($954,000 net of tax benefit or $.12 per share) in the first nine months of 1995 compared to $675,000 ($439,000 net of tax benefit or $.04 per share) in the first nine months of 1996. In September 1996, the Company revised its estimate of the loss on discontinuance of EPS and recognized an additional charge to write-down various assets and inventories to estimated realizable value and to establish a provision for estimated costs of asset disposals and future losses related to EPS. 11 14 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ---------------------------------------------------------------- AND RESULTS OF OPERATIONS (CONTINUED) ----------------------------------------- LIQUIDITY AND CAPITAL RESOURCES The Company's working capital is closely related to and dependent on the current prices paid for its oil and gas. The Company's current ratio at September 30, 1996 was 1.62 to 1.00. During the first nine months of 1996, working capital increased $3.0 million from $17.4 million to $20.4 million. The increase was primarily due to a reduction in accounts payable and accrued expenses ($6.2 million) partially offset by an increase in the current portion of long-term liabilities ($2.4 million) attributable to the first principal payment on the senior notes due on September 30, 1997. The Company's operating activities provided cash flow of $35.0 million during the first nine months of 1996. On May 25, 1995, the Company's revolving bank facility was amended. The facility was increased to $200 million, the maturity date was extended to March 31, 1999, and the borrowing base was increased to $81 million. The borrowing base is calculated by the bank group and is based on the cash flows generated by the Company's proved developed reserves, gas gathering systems and other corporate assets. Generally, the Company can expect to have the borrowing base increased by at least 50% of the present value before income taxes (discounted at 10% per annum) of any proved developed reserves added through acquisition or drilling. On February 16, 1996, the Company's revolving bank facility was further amended. The maturity date was extended to March 31, 2001 and the LIBOR interest rate option was modified to decrease from LIBOR + 2% to a range of LIBOR + 1-1/4% to LIBOR + 3/4% as outstanding balances decrease in relation to the borrowing base. Outstanding balances under the facility incur interest at the Company's choice of either: (1) the one, two or three-month LIBOR + 1.25% (6.91% for the three-month LIBOR interest rate option at September 30, 1996) or (2) the bank's prime rate (8.25% at September 30, 1996). At September 30, 1996, the Company had $60 million outstanding under this facility. The amended facility will continue to restrict the sale of assets to no more than 15% of shareholders' equity in any one year and will require the Company to maintain certain levels of net worth, working capital and debt service coverage. When market conditions are favorable, the Company may enter into interest rate swap arrangements, whereby a portion of the Company's floating rate exposure is exchanged for a fixed interest rate. The Company had no such derivative financial instruments at September 30, 1996. During 1993, the Company placed $35 million of 7% fixed-rate senior notes with five insurance companies in a private placement. These notes, which are interest-only for four years, mature on September 30, 2005. Equal annual principal payments of $3,888,888 will be required on each September 30 commencing in 1997. The senior note agreement limits the Company's senior debt to 50% of the Company's discounted present value (at 10%) of its oil and gas reserves plus the net book value of its gas gathering systems. 12 15 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ---------------------------------------------------------------- RESULTS OF OPERATIONS (CONTINUED) --------------------------------- Other terms and covenants are substantially the same as those contained in the $200 million revolving credit facility. The Company seeks to replace its production and expand its reserve base through the acquisition of producing oil and gas properties, development drilling in the shallow blanket formations and exploratory and development drilling in the less developed and deeper formations in the Appalachian, Michigan and Illinois Basins. The Company's acquisition activities in 1996 are discussed in Note (2) to the Consolidated Financial Statements. The Company plans to drill approximately 200 gross wells in 1996. The following table summarizes the Company's drilling activities for the nine months ended September 30, 1996.
1996 DRILLING RESULTS NINE MONTHS ENDED SEPTEMBER 30, 1996 ------------------------------------------- GROSS NET ------------------- ------------------- Development wells Shallow blanket formations Productive 79 64.5 Dry -- -- Less developed and deeper formations Productive 26 18.5 Dry 12 7.1 Exploratory wells Productive -- -- Dry 3 1.4
The shallow blanket formation wells were drilled in Michigan to the Antrim Shale formation; in New York and Pennsylvania to the Medina Sandstone formation; in New York to the Bass Island Sandstone formation; and in West Virginia to the Devonian Shale formation. The wells drilled to the less developed and deeper formations were drilled to the Dundee Carbonate and Niagaran Carbonate formations in Michigan; to the Beekmantown Dolomite, Rose Run Sandstone and Trempealeau Sandstone formations in Ohio; and to the Onondaga Limestone and Oriskany Sandstone formations in Pennsylvania. The Company currently expects to spend approximately $28 million during 1996 on its direct drilling activities and approximately $9 million for other capital expenditures. Through September 30, 1996, the Company had expended approximately $18.0 million on its direct drilling activities to drill 120 gross (91.5 net) wells. Reserves discovered totaled an estimated 21.4 Bcf equivalent. The Company's acquisition program is expected to be financed with any available cash flow over $37 million and with its available bank credit line. The Company believes that its existing sources of working capital are sufficient to satisfy all currently anticipated working capital requirements. 13 16 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ---------------------------------------------------------------- AND RESULTS OF OPERATIONS (CONTINUED) ----------------------------------------- The level of the Company's cash flow in the future will depend on a number of factors including the demand and price levels for oil and gas, its ability to acquire additional producing properties and the scope and success of its drilling activities. The Company intends to finance such activities principally through its available cash flow, through additional borrowings and, to the extent necessary, the issuance of additional common or preferred stock. FORWARD-LOOKING INFORMATION The forward-looking statements regarding future operating and financial performance contained in this report involve risks and uncertainties that include, but are not limited to, the Company's future production and costs of operation, the market demand for, and prices of, oil and natural gas, results of the Company's future drilling and gas marketing activity, the uncertainties of reserve estimates, environmental risks, and other factors detailed in the Company's filings with the Securities and Exchange Commission. Actual results may differ materially from forward-looking statements made in this report. 14 17 - ------------------------------------------------------------------------------- PART II Other information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits See Exhibit Index (b) Reports on Form 8-K None 15 18 - ------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BELDEN & BLAKE CORPORATION Date: November 5, 1996 By: /S/ Max L. Mardick -------------------------- ---------------------------------- Max L. Mardick, Director, President, and Chief Operating Officer Date: November 5, 1996 By: /S/ Ronald E. Huff --------------------------- --------------------------------- Ronald E. Huff, Director, Senior Vice President and Chief Financial Officer 16 19 EXHIBIT INDEX NO. DESCRIPTION - --- ----------- 10.1 Amended and Restated Employment Agreement between the Company and Henry S. Belden IV 10.2 Severance Agreement between the Company and Max L. Mardick 10.3 Form of Severance Agreement between the Company and the following officers: Ronald E. Huff, Ronald L. Clements and Joseph M. Vitale 10.4 Form of Severance Agreement between the Company and the following officers and managerial personnel: Dennis D. Belden, James C. Ewing, Charles P. Faber, Tommy L. Knowles, Donald A. Rutishauser, L. H. Sawatsky, Leo A. Schrider and Dean A. Swift 10.5 Severance Pay Plan for Key Employees of Belden & Blake Corporation 11. Computation of Earnings Per Common and Common Equivalent Shares 27. Financial Data Schedule EX-10.1 2 EXHIBIT 10.1 1 EXHIBIT 10.1 October 25, 1996 Mr. Henry S. Belden, IV 5200 Stoneham Road North Canton, OH 44720 Dear Mr. Belden: This letter (the "Agreement") will amend and restate the agreement between you and Belden & Blake Corporation (the "Company"), originally effective October 1, 1991. The effective date of this amendment and restatement is October 1, 1996. 1. EMPLOYMENT. The Company will employ you and you agree to serve as its Chairman and Chief Executive Officer on a continuing basis but in no event for a period shorter than five years nor longer than the period ending on the sixty-fifth (65th) anniversary of your birth. On each October 1, commencing October 1, 1997, this agreement will be automatically extended for an additional one year so that it will continue to be in effect for five years from the date of such extension unless either you or the Company give to the other written notice of termination at least six (6) months prior to the anniversary of your employment in which event this Agreement will terminate at the expiration of the five year term then in effect. You will receive an annual salary of not less than $322,500.00, payable in equal bi-weekly installments. Your base salary will be reviewed annually by the Company's compensation committee. You will participate in all incentive compensation and benefit plans hereafter offered by the Company to its senior executives. 2. DUTIES DURING EMPLOYMENT. During your employment by the Company, you will devote your best efforts and substantially all of your business time and attention to the Company's affairs, including those of subsidiary and affiliated companies, except that you may be a director of other non-competitive companies as you and the Company may agree. You shall have such duties and responsibilities as are customary for the chief executive officer of companies similar in size and character to the Company and as shall be determined and assigned to you by the Board of Directors of the Company. 3. BONUSES DURING EMPLOYMENT. In addition to your annual base salary, the Company shall pay you such bonuses as the Board of Directors of the Company may, in its discretion, deem appropriate and commensurate with your performance and that of the Company. 2 Mr. Henry S. Belden, IV October 25, 1996 Page 2 4. HEALTH AND OTHER FRINGE BENEFITS DURING EMPLOYMENT. During the term of your employment, in addition to the payments provided herein, you may participate in such other fringe benefit plans or programs as the Company may from time to time sponsor, provided that you meet the participation and eligibility requirements thereof. 5. LIABILITY INSURANCE DURING EMPLOYMENT. During the term of your employment hereunder, the Company shall provide to you director and officer liability insurance coverage with coverage limits not less than that provided to directors and officers of companies similar in size and character to the Company. In addition, the Company shall provide you indemnification from liability and costs of defense relating to your service as a director and officer to the maximum extent permitted under the General Corporation Law of the State of Ohio. 6. TERMINATION OF EMPLOYMENT UPON DEATH, DISABILITY OR FOR CAUSE. Notwithstanding any other provision of this Agreement, your employment with the Company will terminate in the event of your death or in the event of your total and permanent disability which shall be defined as a disability which shall qualify you for long term total and permanent disability benefits under the Company's disability insurance policy. The Company shall provide and keep in force a policy of insurance to provide disability benefits to you equivalent to that provided to senior executives of companies similar in size and character to the Company. Your employment may be terminated by the Company immediately and without any liability to you whatever if such termination shall occur for "cause". For purposes of this Agreement, termination shall be deemed to have been for "cause" only if based on the fact that you have committed any of the following acts and such has been materially harmful to the Company: (a) An act of fraud, embezzlement or theft constituting a felony and resulting or intended to result directly or indirectly in substantial personal gain to you at the expense of the Company; or (b) You have failed to devote a substantial portion of your business time (that is time after giving effect to illness, vacations and other customary absences) during normal business hours to the business and affairs of the Company. 3 Mr. Henry S. Belden, IV October 25, 1996 Page 3 7. RIGHT TO TERMINATE EMPLOYMENT AND SEVERANCE BENEFITS. Notwithstanding any other provisions of this Agreement, you shall have the right to terminate your employment with the Company and receive the severance benefits identified in this Section without further obligation on your part to the Company in the event of the occurrence of any of the following: (a) The Board of Directors of the Company fails to re-elect you to the offices of Chairman and Chief Executive Officer of the Company at any time during the term hereof in which case you may treat such failure as a termination of your employment by the Company other than for "cause". (b) A change of more than fifty (50) miles has occurred in the location of the Company's principal office without your consent requiring you to move. (c) A good faith determination by you that there has occurred a substantial and adverse change in the conditions of your employment or a significant reduction in your compensation or other employee benefits in excess of any such reductions made effective for key executives of the Company generally. In the event of the occurrence of any one or more of the foregoing events and your election to terminate your employment with the Company as a result thereof, the Company shall pay you in a lump sum an amount equal to five (5) times the compensation paid to you by the Company during the calendar year preceding your termination of employment. For purposes hereof, your compensation shall include all compensation includable in gross income for federal income tax purposes as required to be reported by the Company on Internal Revenue Service Form W-2. You shall not be required to mitigate damages or the amount of such payment or to seek employment elsewhere. 8. TERMINATION OF EMPLOYMENT AND SEVERANCE COMPENSATION FOLLOWING A CHANGE IN CONTROL. (a) If, following the occurrence of a Change in Control (defined below), the Company terminates your employment during the Severance Period (defined below) other than for "cause" as described in Section 6, (i) the Company shall pay you in a lump sum an amount equal to five (5) times the compensation paid to you by the Company during the calendar year preceding your termination of 4 Mr. Henry S. Belden, IV October 25, 1996 Page 4 employment, as such amount is determined under Section 7, (ii) for a period of three (3) years following your termination of employment, the Company will arrange to provide you with health care coverage substantially similar to the coverage provided to you immediately prior to your termination of employment, and (iii) all outstanding stock options granted under the Company's Stock Option Plan shall immediately vest. If the continued health coverage under clause (ii) of this Subsection is provided through participation in the Company's group health plan, then following such period of continued health care coverage, you will be eligible to elect to continue, for yourself and your eligible dependents, health benefits in accordance with the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. (b) For the purposes of this Section, the term "Change in Control" means the occurrence during the term of this Agreement of any of the following events: (i) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding voting stock of the corporation or person surviving such merger, consolidation or reorganization, immediately after such transaction, are beneficially held, directly or indirectly, in the aggregate by the beneficial holders of voting stock of the Company immediately prior to such transaction; (ii) The Company sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the then-outstanding voting stock of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of voting stock of the Company immediately prior to such sale or transfer; 5 Mr. Henry S. Belden, IV October 25, 1996 Page 5 (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 25% or more of the combined voting power of the then-outstanding voting stock of the Company; (iv) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (v) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof; PROVIDED, HOWEVER, that for purposes of this clause each director who is first elected, or first nominated for election by the Company's stockholders, by a vote of at least two-thirds of the directors of the Company (or a committee thereof) then still in office who were directors of the Company at the beginning of any such period will be deemed to have been a director of the Company at the beginning of such period. Notwithstanding the foregoing provisions of clause (iii) or clause (iv) of this Section, unless otherwise determined in a specific case by majority vote of the board of directors of the Company, a "Change in Control" shall not be deemed to have occurred for purposes of clause (iii) or clause (iv) of this Section solely because (A) the Company, (B) a subsidiary, (C) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company or any subsidiary, (D) any person or group of which employees of the Company or a subsidiary control a greater 6 Mr. Henry S. Belden, IV October 25, 1996 Page 6 than 25% interest unless the board of directors of the Company determines that such person or group is making a "hostile acquisition", or (E) any person or group of which you are an affiliate either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of voting stock, whether in excess of 25% or otherwise, or because the Company reports that a change in control of the Company has occurred or will occur in the future by reason of such beneficial ownership. (c) For purposes of this Section, the term "Severance Period" means the period of time commencing on the date of the first occurrence of a Change in Control and continuing until the earliest of (i) the third anniversary of the occurrence of the Change in Control (ii) your death, or (iii) your attainment of age 65; PROVIDED, HOWEVER, that commencing on each anniversary of the Change in Control, the Severance Period will automatically be extended for an additional year unless, not later than 90 calendar days prior to such anniversary date, either you or the Company has given written notice to the other that the Severance Period is not to be so extended. (d) Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control during the term of your employment pursuant to Section 1, you may terminate employment with the Company and any subsidiary for any reason, or without reason, with the right to severance compensation as provided in Subsection (a) of this Section. 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. Notwithstanding any other provision hereof, unless such action would be expressly prohibited by applicable law, if any payment of distribution by the Company or any of its affiliates to or for your benefit, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the 7 Mr. Henry S. Belden, IV October 25, 1996 Page 7 Internal Revenue Code of 1986, as amended (the "Code") by reason of being considered "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the "Excise Tax"), then you shall be entitled to receive an additional payment or payments (collectively, a "Gross-Up Payment"); PROVIDED, HOWEVER, that no Gross-Up Payment shall be made with respect to the Excise Tax, if any, attributable to (a) any incentive stock option, as defined by Section 422 of the Code ("ISO") granted prior to the execution of this Agreement, or (b) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO described in clause (a). The Gross-Up Payment shall be in an amount such that, after you pay all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. 10. OTHER BENEFITS. If your employment is terminated pursuant to Section 8, the Company, at its sole expense for a period of up to three (3) years following the date of your termination of employment, shall provide you with up to 1,200 square feet of usable office space at a location you select, including rent, utilities and escalation, but not in the Company's home office building. The office space shall be furnished with your current office furniture and shall be equipped with other reasonable furnishings, including computer, telephone and photocopy equipment and shall be staffed by a full-time salaried qualified executive secretary with appropriate fringe benefits. Ownership of the furnishings and equipment or leasehold interests therein owned or leased and furnished by the Company shall be retained by the Company and at the end of the three (3) year period possession thereof shall be delivered to the Company. The Company shall pay all other operating expenses of the office including, without limitation, the cost of telephone service. You may at any time deliver possession of this office space and the furnishings to the Company, at which time the Company's obligations under this Section shall cease. 11. LEGAL FEES AND EXPENSES. It is the intent of the Company that you not be required to incur the expenses associated with the enforcement of your rights under this Agreement by litigation or other legal action because the cost and expense 8 Mr. Henry S. Belden, IV October 25, 1996 Page 8 thereof would substantially detract from the benefits intended to be extended to you hereunder. Accordingly, if it should appear to you that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation designed to deny, or to recover from, you the benefits intended to be provided to you hereunder, the Company irrevocably authorizes you from time to time to retain counsel of your choice, at the expense of the Company as hereafter provided, to represent you in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to your entering into an attorney-client relationship with such counsel, and in that connection the Company agrees with you that a confidential relationship shall exist between you and such counsel. The Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys' and related fees and expenses you incur as a result of the Company's failure to perform this Agreement or any provision hereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision hereof as aforesaid. 12. SECURITY FOR PAYMENT. To ensure that you can enforce the provisions of this Agreement, two agreements ("Trust Agreement" and "Trust Agreement No. 2"; collectively, the "Trusts") will be established between the Company and a trustee appointed by the Company (the "Trustee"). The Trust Agreement sets forth the terms and conditions relating to payment from the Trust Agreement of the amounts and the other benefits provided pursuant to this Agreement and owed by the Company and Trust Agreement No. 2 sets forth the terms and conditions relating to payment from Trust Agreement No. 2 of attorneys' and related fees and expenses pursuant to Section 11 owed by the Company. You shall make demand on the Company for any payments due you pursuant to Section 11 prior to making demand therefor on the Trustee under Trust Agreement No. 2. Payments by such Trustee shall discharge the Company's liability under Section 11 only to the extent that trust assets are used to satisfy such liability. 9 Mr. Henry S. Belden, IV October 25, 1996 Page 9 13. OBLIGATION OF THE COMPANY TO FUND TRUSTS. Upon the earlier to occur of (a) a Change in Control that involves a transaction that was not approved by the board of directors of the Company (the "Board"), and was not recommended to the Company's shareholders by the Board, (b) a declaration by the Board that the Trusts should be funded in connection with a Change in Control that involves a transaction that was approved by the Board, or was recommended to shareholders by the Board, or (c) a declaration by the Board that a Change in Control is imminent, the Company shall promptly to the extent it has not previously done so, and in any event within five (5) business days: (i) transfer to the Trustee to be added to the principal of the trust under the Trust Agreement a sum equal to the aggregate value on the date of the Change in Control of the payment provided for under Section 7 or Section 8 and other benefits provided hereunder which could become payable to you; PROVIDED, HOWEVER, that the Company shall not be required to transfer, in the aggregate, to the trust under the Trust Agreement a sum in excess of $12,000,000. Any payment by the Trustee pursuant to the Trust Agreement shall, to the extent thereof, discharge the Company's obligation to pay the payment provided for under Section 7 or Section 8 and other benefits provided hereunder which become payable to you, it being the intent of the Company that assets in such Trust be held as security for the Company's obligation to pay the payment provided for under Section 7 or Section 8 and other benefits provided hereunder; and (ii) transfer to the Trustee to be added to the principal of the trust under Trust Agreement No. 2 the sum of $250,000. Any payments of attorneys' and related fees and expenses, which are the obligation of the Company under Section 11, by the Trustee pursuant to Trust Agreement No. 2 shall, to the extent thereof, discharge the Company's obligation hereunder, it being the intent of the Company that such assets in such Trust be held as security for the Company's obligation under Section 11. 14. SUCCESSOR AND BINDING AGREEMENT. Your rights under this agreement shall inure to the benefit of your executors, administrators, personal representatives and assigns in the event of your death. This agreement shall be binding upon and inure to 10 Mr. Henry S. Belden, IV October 25, 1996 Page 10 the benefit of the Company and any successor of the Company, including, without limitation, any person, firm or corporation acquiring directly or indirectly all or substantially all the assets or capital stock of the Company (and such successor shall thereafter be deemed the "Company" for the purpose of this agreement). 15. AUTOMOBILE. During the term of your employment, the Company shall provide to you biennially, a new passenger automobile suitable to the performance of your duties and appropriate to your office. 16. NON-COMPETITION. During the term of your employment with the Company and for a period of two years thereafter, you will refrain from engaging in a competing business without having first obtained the written consent of the Company. For the purpose of this Agreement, you will be considered to be "engaging in a competing business" if you participate in the management of any business enterprise if such enterprise engages in substantial and direct competition with the Company and such enterprise's sales of any product or service competitive with any product or service of the Company amounted to 10% of such enterprise's net sales for its most recently completed fiscal year and if the Company's net sales of said product or service amount to 10% of the Company's net sales for its most recently completed fiscal year. Notwithstanding the foregoing, for the purposes of this Agreement, "engaging in a competing business" will not include (a) the mere ownership of securities in any such enterprise and the exercise of rights appurtenant thereto, (b) participation in the management of any such enterprise other than in connection with the competitive operations of such enterprise or (c) exploration of or the production from properties or interests you own. 17. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied with respect to the subject matter hereof have been made by any of the parties that are not set forth expressly in this Agreement and every one of them (if, in 11 Mr. Henry S. Belden, IV October 25, 1996 Page 11 fact, there have been any) is hereby terminated without liability or any other legal effect whatsoever. 18. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof and shall supersede all prior verbal or written agreements, covenants, communications, understandings, commitments, representations or warranties, whether oral or written, by any party hereto or any of its representatives pertaining to such subject matter. 19. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the substantive laws of the State of Ohio, without giving effect to the principles of conflict of laws of such State. 20. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall nevertheless remain in full force and effect. 21. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement. 22. CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings used herein are for convenience and are not part of this Agreement and shall not be used in construing it. 23. FURTHER ASSURANCES. Each party hereto shall execute such additional documents, and do such additional things, as may reasonably be requested by the other party to effectuate the purposes and provisions of this Agreement. 12 Mr. Henry S. Belden, IV October 25, 1996 Page 12 In order to formalize this amendment and restatement of the agreement between you and the Company expressed in this letter, please sign and return the enclosed copy of this letter. Very truly yours, BELDEN & BLAKE CORPORATION By: /s/ M. L. Mardick ---------------------------- Agreed: /s/ Henry S. Belden ---------------------------- Henry S. Belden, IV EX-10.2 3 EXHIBIT 10.2 1 Exhibit 10.2 SEVERANCE AGREEMENT THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of October 25, 1996, is made and entered into by and between Belden & Blake Corporation, an Ohio corporation (the "Corporation"), and Max L. Mardick (the "Executive"). WITNESSETH: WHEREAS, the Executive is a senior executive or a key employee of the Company (as defined herein) and has made and is expected to continue to make major contributions to the short- and long-term profitability, growth and financial strength of the Company; WHEREAS, the Company recognizes that, as is the case for most publicly held companies, the possibility of a Change in Control (as defined below) exists; WHEREAS, the Company desires to assure itself of both present and future continuity of management and desires to establish certain minimum severance benefits for certain of its senior executives, including the Executive, applicable in the event of a Change in Control; WHEREAS, the Company wishes to ensure that its senior executives are not practically disabled from discharging their duties in respect of a proposed or actual transaction involving a Change in Control; and WHEREAS, the Company desires to provide additional inducement for the Executive to continue to remain in the ongoing employ of the Company. NOW, THEREFORE, the Company and the Executive agree as follows: 1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters: (a) "Base Pay" means the Executive's annual base salary at a rate not less than the Executive's annual fixed or base compensation as in effect for Executive immediately prior to the occurrence of a Change in Control or such higher rate as may be determined from time to time by the Board or a committee thereof. "Base Pay" shall include any portion of the Executive's annual base salary the receipt of which the Executive has elected to defer. (b) "Board" means the Board of Directors of the Corporation. 2 (c) "Cause" means that, prior to any termination pursuant to Section 3(b), the Executive shall have committed: (i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company or any Subsidiary; (ii) intentional wrongful damage to property of the Company or any Subsidiary; (iii) intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary; or (iv) intentional wrongful engagement in any Competitive Activity; and any such act shall have been materially harmful to the Company. For purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the Board then in office at a meeting of the Board called and held for such purpose, after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel (if the Executive chooses to have counsel present at such meeting), to be heard before the Board, finding that, in the good faith opinion of the Board, the Executive had committed an act constituting "Cause" as herein defined and specifying the particulars thereof in detail. Nothing herein will limit the right of the Executive or his beneficiaries to contest the validity or propriety of any such determination. (d) "Change in Control" means the occurrence during the Term of any of the following events: (i) The Corporation is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding Voting Stock of the corporation or person surviving such merger, consolidation or reorganization, immediately after such transaction, are beneficially held, directly or indirectly, in the aggregate by the 2 3 beneficial holders of Voting Stock of the Corporation immediately prior to such transaction; (ii) The Corporation sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the then-outstanding Voting Stock of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer; (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 25% or more of the combined voting power of the then-outstanding Voting Stock of the Corporation; (iv) The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Corporation has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (v) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof; PROVIDED, HOWEVER, that for purposes of this clause (v) each Director who is first elected, or first nominated for election by the Company's stockholders, by a vote of at least two-thirds of the Directors of the Corporation (or a committee thereof) then still in office who were Directors of the Corporation at the beginning of any such period will be deemed to have been a Director of the Corporation at the beginning of such period. Notwithstanding the foregoing provisions of Paragraph (iii) or (iv) of this Subsection, unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of Paragraph (iii) or (iv) of this Subsection solely because (A) the Corporation, (B) a Subsidiary, (C) any Company- 3 4 sponsored employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary, (D) any person or group of which employees of the Company or a Subsidiary control a greater than 25% interest unless the Board determines that such person or group is making a "hostile acquisition", or (E) any person or group of which the Executive is an affiliate either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 25% or otherwise, or because the Corporation reports that a change in control of the Corporation has occurred or will occur in the future by reason of such beneficial ownership. (e) "Company" means the Corporation and its Subsidiaries. (f) "Competitive Activity" means the Executive's participation, without the written consent of an officer of the Company, in the management of any business enterprise if such enterprise engages in substantial and direct competition with the Company and such enterprise's sales of any product or service competitive with any product or service of the Company amounted to 10% of such enterprise's net sales for its most recently completed fiscal year and if the Company's net sales of said product or service amounted to 10% of the Company's net sales for its most recently completed fiscal year. "Competitive Activity" will not include (i) the mere ownership of securities in any such enterprise and the exercise of rights appurtenant thereto or (ii) participation in the management of any such enterprise other than in connection with the competitive operations of such enterprise. (g) "Employee Benefits" means the perquisites, benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter by the Company, providing perquisites, benefits and service credit for benefits at least as great 4 5 in the aggregate as are payable thereunder prior to a Change in Control. (h) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (i) "Incentive Pay" means an annual amount equal to not less than the highest aggregate annual bonus (whether paid in cash or stock and regardless of any election to defer actual payment of all or any portion of such bonus), incentive or other payments of compensation (including the stock portion of the profit-sharing payment contributed by the Company to the Belden & Blake Corporation 401(k) Profit Sharing Plan, but not cash or stock payments in lieu of distributions of restricted stock which vested in any year or stock options), in addition to Base Pay, made or to be made in regard to services rendered in any calendar year during the three calendar years immediately preceding the year in which the Change in Control occurred pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded) of the Company, or any successor thereto providing benefits at least as great as the benefits payable thereunder prior to a Change in Control. (j) "Severance Period" means the period of time commencing on the date of the first occurrence of a Change in Control and continuing until the earliest of (i) the third anniversary of the occurrence of the Change in Control, (ii) the Executive's death, or (iii) the Executive's attainment of age 65. (k) "Subsidiary" means an entity in which the Corporation directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock. (l) "Term" means the period commencing as of the date hereof and expiring as of the later of (i) the close of business on December 31, 1998, or (ii) the expiration of the Severance Period; PROVIDED, HOWEVER, that (A) commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement will automatically be extended for an additional year unless, not later than September 30 of the immediately preceding year, the Company or the Executive shall have given notice that it or the Executive, as the case may be, does not wish to have the Term extended and (B) subject to the last sentence of Section 9, if, prior to a Change in Control, the Executive ceases for any reason to be an employee of the Company and any Subsidiary, thereupon without further action the Term shall be deemed to have expired and this Agreement will immediately terminate and be of no further effect. For purposes of this Subsection, the Executive shall not be deemed to have ceased to be an employee of the 5 6 Company and any Subsidiary by reason of the transfer of Executive's employment between the Corporation and any Subsidiary, or among any Subsidiaries. (m) "Termination Date" means the date on which the Executive's employment with the Company is terminated (the effective date of which shall be the date of termination, or such other date that may be specified by the Executive if the termination is pursuant to Section 3(b) or (c)). (n) "Voting Stock" means securities entitled to vote generally in the election of directors. 2. OPERATION OF AGREEMENT. This Agreement will be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, this Agreement will not be operative unless and until a Change in Control occurs. Upon the occurrence of a Change in Control at any time during the Term, without further action, this Agreement shall become immediately operative. 3. TERMINATION FOLLOWING A CHANGE IN CONTROL. (a) In the event of the occurrence of a Change in Control, the Executive's employment may be terminated by the Company during the Severance Period and the Executive shall be entitled to the benefits provided by Section 4 unless such termination is the result of the occurrence of one or more of the following events: (i) The Executive's death; (ii) If the Executive becomes permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, Executive immediately prior to the Change in Control; or (iii) Cause. If, during the Severance Period, the Executive's employment is terminated by the Company or any Subsidiary other than pursuant to Paragraph (i), (ii) or (iii) of this Subsection, the Executive will be entitled to the benefits provided by Section 4. (b) In the event of the occurrence of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary during the Severance Period with the right to the benefits as provided in Section 4 upon the occurrence of one or more of the following events (regardless of whether any other reason, other than Cause as hereinabove provided, for such termination exists or has occurred, including without limitation other employment): 6 7 (i) Failure to elect or reelect or otherwise to maintain the Executive in the office or the position, or a substantially equivalent office or position, of or with the Company and/or a Subsidiary, as the case may be, which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a Director of the Corporation (or any successor thereto) if the Executive shall have been a Director of the Corporation immediately prior to the Change in Control; (ii) (A) A significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Company and any Subsidiary which the Executive held immediately prior to the Change in Control, (B) a reduction in the aggregate of the Executive's Base Pay and Incentive Pay received from the Company and any Subsidiary, or (C) the termination or denial of the Executive's rights to Employee Benefits or a reduction in the scope or value thereof, any of which is not remedied by the Company within 10 calendar days after receipt by the Corporation of written notice from the Executive of such change, reduction or termination, as the case may be; (iii) The liquidation, dissolution, merger, consolidation or reorganization of the Corporation or transfer of all or substantially all of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its business and/or assets have been transferred (directly or by operation of law) assumed all duties and obligations of the Company under this Agreement pursuant to Section 11(a); (iv) The Company relocates its principal executive offices, or requires the Executive to have his principal location of work changed, to any location that is in excess of 25 miles from the location thereof immediately prior to the Change in Control, or requires the Executive to travel away from his office in the course of discharging his responsibilities or duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to the Change in Control without, in either case, his prior written consent; or (v) Without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto. 7 8 (c) Notwithstanding anything contained in this Agreement to the contrary, in the event of the occurrence of a Change in Control, commencing six months after the Change in Control, the Executive may terminate employment with the Company and any Subsidiary for any reason, or without reason, with the right to severance compensation as provided in Section 4(a). (d) A termination by the Company pursuant to Subsection (a) of this Section or by the Executive pursuant to Subsection (b) or (c) of this Section will not affect any rights that the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company providing Employee Benefits, which rights shall be governed by the terms thereof. 4. SEVERANCE COMPENSATION. (a) If, following the occurrence of a Change in Control, the Company terminates the Executive's employment during the Severance Period other than pursuant to Section 3(a), or if the Executive terminates his employment pursuant to Section 3(b) or (c), the Company will pay to the Executive the following amounts within five business days after the Termination Date and continue to provide to the Executive the following benefits: (i) A lump sum payment in an amount equal to three times the sum of (A) Base Pay (at the highest rate in effect for any period prior to the Termination Date), plus (B) Incentive Pay (determined in accordance with the standards set forth in Section 1(i)). (ii) (A) For a period of 36 months following the Termination Date (the "Continuation Period"), the Company will arrange to provide the Executive with Employee Benefits that are welfare benefits (but not stock option, stock purchase, stock appreciation or similar compensatory benefits) substantially similar to those that the Executive was receiving or entitled to receive immediately prior to the Termination Date (or, if greater, immediately prior to the reduction, termination, or denial described in Section 3(b)(ii)), except that the level of any such Employee Benefits to be provided to the Executive may be reduced in the event of a corresponding reduction generally applicable to all recipients of or participants in such Employee Benefits, and (B) such Continuation Period will be considered service with the Company for the purpose of determining service credits and benefits due and payable to the Executive under the Company's retirement income, supplemental executive retirement and other benefit plans of the Company applicable to the Executive, his dependents or his beneficiaries immediately prior to the Termination Date. In addition, the Company shall provide the Executive, at the Executive's election, with either outplacement 8 9 services by a firm selected by the Executive, at the expense of the Company in an amount up to 20% of the Executive's Base Pay, or reimbursement of reasonable outplacement expenses actually incurred by the Executive, in an amount up to 15% of the Executive's Base Pay. If and to the extent that any benefit described in Subparagraph (A) or (B) of this Paragraph is not or cannot be paid or provided under any policy, plan, program or arrangement of the Company or any Subsidiary, as the case may be, then the Company will itself pay or provide for the payment to the Executive, his dependents and beneficiaries, of such Employee Benefits. Without otherwise limiting the purposes or effect of Section 5, Employee Benefits otherwise receivable by the Executive pursuant to Subparagraph (A) of this Paragraph will be reduced to the extent comparable welfare benefits are actually received by the Executive from another employer during the Continuation Period following the Executive's Termination Date, and any such benefits actually received by the Executive shall be reported by the Executive to the Corporation. If the continued health coverage under Subparagraph (A) of this Paragraph is provided through participation in the Company's group health plan, then following such period of continued health care coverage, the Executive will be eligible to elect to continue, for himself and his eligible dependents, health benefits in accordance with the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. (b) Upon the occurrence of any of the events described in the third paragraph of Section 8 of the Company's Stock Option Plan, each stock option granted to the Executive under such Plan then outstanding but not exercisable shall immediately become and be exercisable in full in accordance with the terms of such Plan and the applicable option agreement between the Corporation and the Executive. (c) Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on the amount or value thereof at an annualized rate of interest equal to the "prime rate" as quoted from time to time during the relevant period in the Northeast Edition of THE WALL STREET JOURNAL. Such interest will be payable as it accrues on demand. Any change in such prime rate will be effective on and as of the date of such change. (d) Notwithstanding any provision of this Agreement to the contrary, the parties' respective rights and obligations under this Section and under Sections 5 and 7 will survive any termination or expiration of this Agreement or the 9 10 termination of the Executive's employment following a Change in Control for any reason whatsoever. 5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event that this Agreement shall become operative and it shall be determined (as hereafter provided) that any payment or distribution by the Company or any of its affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any successor provision thereto) by reason of being considered "contingent on a change in ownership or control" of the Corporation, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (collectively, a "Gross-Up Payment"); PROVIDED, HOWEVER, that no Gross-up Payment shall be made with respect to the Excise Tax, if any, attributable to (i) any incentive stock option, as defined by Section 422 of the Code ("ISO") granted prior to the execution of this Agreement, or (ii) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO described in clause (i). The Gross-Up Payment shall be in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the provisions of Subsection (f) of this Section, all determinations required to be made under this Section, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, if any, shall be made by a nationally recognized accounting firm (the "Accounting Firm") selected by the Executive in his sole discretion. The Executive shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within 30 calendar days after the Termination 10 11 Date, if applicable, and any such other time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to the Executive within five business days after receipt of such determination and calculations with respect to any Payment to the Executive. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Company and the Executive an opinion that the Executive has substantial authority not to report any Excise Tax on his federal, state or local income or other tax return. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Subsection (f) of this Section and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (c) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Subsection (b) of this Section. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive. (d) The federal, state and local income or other tax returns filed by the Executive shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Payment, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the 11 12 applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (e) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Subsection (b) of this Section shall be borne by the Company. If such fees and expenses are initially paid by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his payment thereof. (f) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as promptly as practicable but no later than 10 business days after the Executive actually receives notice of such claim and the Executive shall further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by the Executive). The Executive shall not pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (ii) the date that any payment of amount with respect to such claim is due. If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company; (iii) cooperate with the Company in good faith in order effectively to contest such claim; and 12 13 (iv) permit the Company to participate in any proceedings relating to such claim; PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and shall indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Subsection, the Company shall control all proceedings taken in connection with the contest of any claim contemplated by this Subsection and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that the Executive may participate therein at his own cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; PROVIDED, HOWEVER, that if the Company directs the Executive to pay the tax claimed and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto, imposed with respect to such advance; and PROVIDED FURTHER, HOWEVER, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (g) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Subsection (f) of this Section, the Executive receives any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Subsection (f) of this Section) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Subsection (f) of this Section, a determination is made that the Executive shall not be entitled to any 13 14 refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of any such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to the Executive pursuant to this Section. 6. NO MITIGATION OBLIGATION. The Company hereby acknowledges that it will be difficult and may be impossible for the Executive to find reasonably comparable employment following the Termination Date and that the non-competition covenant contained in Section 8 will further limit the employment opportunities for the Executive. In addition, the Company acknowledges that its severance pay plans applicable in general to its salaried employees do not provide for mitigation, offset or reduction of any severance payment received thereunder. Accordingly, the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable, and the Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise, except as expressly provided in the last sentence of Section 4(a)(ii). 7. LEGAL FEES AND EXPENSES. (a) It is the intent of the Company that the Executive not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Executive's entering into an attorney-client 14 15 relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys' and related fees and expenses incurred by the Executive in connection with any of the foregoing. (b) Without limiting the obligations of the Company pursuant to Subsection (a) of this Section, in the event a Change in Control occurs, the performance of the Company's obligations under this Section shall be secured by amounts deposited or to be deposited in trust pursuant to certain trust agreements to which the Corporation shall be a party, which amounts deposited shall in the aggregate be not less than $250,000, providing that the fees and expenses of counsel selected from time to time by the Executive pursuant to Subsection (a) of this Section shall be paid, or reimbursed to the Executive if paid by the Executive, either in accordance with the terms of such trust agreements, or, if not so provided, on a regular, periodic basis upon presentation by the Executive to the trustee of a statement or statements prepared by such counsel in accordance with its customary practices. Any failure by the Company to satisfy any of its obligations under this Subsection shall not limit the rights of the Executive hereunder. Subject to the foregoing, the Executive shall have the status of a general unsecured creditor of the Company and shall have no right to, or security interest in, any assets of the Company or any Subsidiary. 8. COMPETITIVE ACTIVITY; CONFIDENTIAL INFORMATION. (a) During a period ending one year following the Termination Date, if the Executive shall have received or shall be receiving benefits under Section 4, and, if applicable, Section 5, the Executive shall not, without the prior written consent of the Company, which consent shall not be unreasonably withheld, engage in any Competitive Activity. (b)(i) The Executive acknowledges and agrees that in the performance of his duties as an officer and employee of the Company, he was and may be brought into frequent contact with, had or may have had access to, and/or became or may become informed of confidential and proprietary information of the Company and/or information which is a trade secret of the Company (collectively, "Confidential Information"), as more fully described in Paragraph (ii) of this Subsection. The Executive acknowledges and agrees that the 15 16 Confidential Information of the Company gained by the Executive during his association with the Company was or will be developed by and/or for the Company through substantial expenditure of time, effort and money and constitutes valuable and unique property of the Company. (ii) The Executive will keep in strict confidence, and will not, directly or indirectly, at any time, disclose, furnish, disseminate, make available, use or suffer to be used in any manner any Confidential Information of the Company without limitation as to when or how the Executive may have acquired such Confidential Information. The Executive specifically acknowledges that Confidential Information includes any and all information, whether reduced to writing (or in a form from which information can be obtained, translated, or derived into reasonably usable form), or maintained in the mind or memory of the Executive and whether compiled or created by the Company, which derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from the disclosure or use of such information, that reasonable efforts have been put forth by the Company to maintain the secrecy of Confidential Information, that such Confidential Information is and will remain the sole property of the Company, and that any retention or use by the Executive of Confidential Information after the termination of the Executive's employment with and services for the Company shall constitute a misappropriation of the Company's Confidential Information. (iii) The Executive further agrees that he shall return, within ten (10) days of the effective date of his termination as an employee of the Company, in good condition, all property of the Company then in his possession, including, without limitation, (A) property, documents and/or all other materials (including copies, reproductions, summaries and/or analyses) which constitute, refer or relate to Confidential Information of the Company, (B) keys to Company property, (C) files and (D) blueprints or other drawings. (iv) The Executive further acknowledges and agrees that his obligation of confidentiality shall survive, regardless of any other breach of this Agreement or any other agreement, by any party hereto, until and unless such Confidential Information of the Company shall have become, through no fault of the Executive, generally known to the public or the Executive is required by law (after providing the Company with notice and 16 17 opportunity to contest such requirement) to make disclosure. The Executive's obligations under this Subsection are in addition to, and not in limitation or preemption of, all other obligations of confidentiality which the Executive may have to the Company under general legal or equitable principles or statutes. 9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement will create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or following any Change in Control. Any termination of employment of the Executive or the removal of the Executive from the office or position in the Company or any Subsidiary prior to a Change in Control but following the commencement of any discussion with any third person that ultimately results in a Change in Control shall be deemed to be a termination or removal of the Executive after a Change in Control for purposes of this Agreement. 10. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any law or government regulation or ruling. 11. SUCCESSORS AND BINDING AGREEMENT. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company. (b) This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees. (c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Subsections (a) and (b) of this Section. Without limiting the generality or effect of the foregoing, the 17 18 Executive's right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by Executive's will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Subsection, the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated. 12. NOTICES. For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express or UPS, addressed to the Corporation (to the attention of the Secretary of the Corporation) at its principal executive office and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 13. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Ohio, without giving effect to the principles of conflict of laws of such State. 14. VALIDITY. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal. 15. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Corporation. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes and completely replaces any prior severance or employment agreement previously applicable to the Executive. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party which are 18 19 not set forth expressly in this Agreement. References to Sections are to references to Sections of this Agreement. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. BELDEN & BLAKE CORPORATION By: /s/ H. S. Belden ------------------------------ Title: Chief Executive Officer --------------------------- /s/ M. L. Mardick --------------------------------- Max L. Mardick 19 EX-10.3 4 EXHIBIT 10.3 1 Exhibit 10.3 SEVERANCE AGREEMENT ------------------- THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of October 25, 1996, is made and entered into by and between Belden & Blake Corporation, an Ohio corporation (the "Corporation"), and ________________ (the "Executive"). WITNESSETH: ----------- WHEREAS, the Executive is a senior executive or a key employee of the Company (as defined herein) and has made and is expected to continue to make major contributions to the short- and long-term profitability, growth and financial strength of the Company; WHEREAS, the Company recognizes that, as is the case for most publicly held companies, the possibility of a Change in Control (as defined below) exists; WHEREAS, the Company desires to assure itself of both present and future continuity of management and desires to establish certain minimum severance benefits for certain of its senior executives, including the Executive, applicable in the event of a Change in Control; WHEREAS, the Company wishes to ensure that its senior executives are not practically disabled from discharging their duties in respect of a proposed or actual transaction involving a Change in Control; and WHEREAS, the Company desires to provide additional inducement for the Executive to continue to remain in the ongoing employ of the Company. NOW, THEREFORE, the Company and the Executive agree as follows: 1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters: (a) "Base Pay" means the Executive's annual base salary at a rate not less than the Executive's annual fixed or base compensation as in effect for Executive immediately prior to the occurrence of a Change in Control or such higher rate as may be determined from time to time by the Board or a committee thereof. "Base Pay" shall include any portion of the Executive's annual base salary the receipt of which the Executive has elected to defer. (b) "Board" means the Board of Directors of the Corporation. 2 (c) "Cause" means that, prior to any termination pursuant to Section 3(b), the Executive shall have committed: (i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company or any Subsidiary; (ii) intentional wrongful damage to property of the Company or any Subsidiary; (iii) intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary; or (iv) intentional wrongful engagement in any Competitive Activity; and any such act shall have been materially harmful to the Company. For purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the Board then in office at a meeting of the Board called and held for such purpose, after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel (if the Executive chooses to have counsel present at such meeting), to be heard before the Board, finding that, in the good faith opinion of the Board, the Executive had committed an act constituting "Cause" as herein defined and specifying the particulars thereof in detail. Nothing herein will limit the right of the Executive or his beneficiaries to contest the validity or propriety of any such determination. (d) "Change in Control" means the occurrence during the Term of any of the following events: (i) The Corporation is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding Voting Stock of the corporation or person surviving such merger, consolidation or reorganization, immediately after such transaction, are beneficially held, directly or indirectly, in the aggregate by the 2 3 beneficial holders of Voting Stock of the Corporation immediately prior to such transaction; (ii) The Corporation sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the then-outstanding Voting Stock of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer; (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 25% or more of the combined voting power of the then-outstanding Voting Stock of the Corporation; (iv) The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (v) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof; PROVIDED, HOWEVER, that for purposes of this clause (v) each Director who is first elected, or first nominated for election by the Company's stockholders, by a vote of at least two-thirds of the Directors of the Corporation (or a committee thereof) then still in office who were Directors of the Corporation at the beginning of any such period will be deemed to have been a Director of the Corporation at the beginning of such period. Notwithstanding the foregoing provisions of Paragraph (iii) or (iv) of this Subsection, unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of Paragraph (iii) or (iv) of this Subsection solely because (A) the Corporation, (B) a Subsidiary, (C) any Company- 3 4 sponsored employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary, (D) any person or group of which employees of the Company or a Subsidiary control a greater than 25% interest unless the Board determines that such person or group is making a "hostile acquisition", or (E) any person or group of which the Executive is an affiliate either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 25% or otherwise, or because the Corporation reports that a change in control of the Corporation has occurred or will occur in the future by reason of such beneficial ownership. (e) "Company" means the Corporation and its Subsidiaries. (f) "Competitive Activity" means the Executive's participation, without the written consent of an officer of the Corporation, in the management of any business enterprise if such enterprise engages in substantial and direct competition with the Company and such enterprise's sales of any product or service competitive with any product or service of the Company amounted to 10% of such enterprise's net sales for its most recently completed fiscal year and if the Company's net sales of said product or service amounted to 10% of the Company's net sales for its most recently completed fiscal year. "Competitive Activity" will not include (i) the mere ownership of securities in any such enterprise and the exercise of rights appurtenant thereto or (ii) participation in the management of any such enterprise other than in connection with the competitive operations of such enterprise. (g) "Employee Benefits" means the perquisites, benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter by the Company, providing perquisites, benefits and service credit for benefits at least as great 4 5 in the aggregate as are payable thereunder prior to a Change in Control. (h) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (i) "Incentive Pay" means an annual amount equal to not less than the highest aggregate annual bonus (whether paid in cash or stock and regardless of any election to defer actual payment of all or any portion of such bonus), incentive or other payments of compensation (including the stock portion of the profit-sharing payment contributed by the Company to the Belden & Blake Corporation 401(k) Profit Sharing Plan, but not cash or stock payments in lieu of distributions of restricted stock which vested in any year or stock options), in addition to Base Pay, made or to be made in regard to services rendered in any calendar year during the three calendar years immediately preceding the year in which the Change in Control occurred pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded) of the Company, or any successor thereto providing benefits at least as great as the benefits payable thereunder prior to a Change in Control. (j) "Severance Period" means the period of time commencing on the date of the first occurrence of a Change in Control and continuing until the earliest of (i) the third anniversary of the occurrence of the Change in Control, (ii) the Executive's death, or (iii) the Executive's attainment of age 65. (k) "Subsidiary" means an entity in which the Corporation directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock. (l) "Term" means the period commencing as of the date hereof and expiring as of the later of (i) the close of business on December 31, 1998, or (ii) the expiration of the Severance Period; PROVIDED, HOWEVER, that (A) commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement will automatically be extended for an additional year unless, not later than September 30 of the immediately preceding year, the Company or the Executive shall have given notice that it or the Executive, as the case may be, does not wish to have the Term extended and (B) subject to the last sentence of Section 10, if, prior to a Change in Control, the Executive ceases for any reason to be an employee of the Company and any Subsidiary, thereupon without further action the Term shall be deemed to have expired and this Agreement will immediately terminate and be of no further effect. For purposes of this Subsection, the Executive shall not be deemed to have ceased to be an employee of the 5 6 Company by reason of the transfer of Executive's employment between the Corporation and any Subsidiary, or among any Subsidiaries. (m) "Termination Date" means the date on which the Executive's employment with the Company is terminated (the effective date of which shall be the date of termination, or such other date that may be specified by the Executive if the termination is pursuant to Section 3(b)). (n) "Voting Stock" means securities entitled to vote generally in the election of directors. 2. OPERATION OF AGREEMENT. This Agreement will be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, this Agreement will not be operative unless and until a Change in Control occurs. Upon the occurrence of a Change in Control at any time during the Term, without further action, this Agreement shall become immediately operative. 3. TERMINATION FOLLOWING A CHANGE IN CONTROL. (a) In the event of the occurrence of a Change in Control, the Executive's employment may be terminated by the Company during the Severance Period and the Executive shall be entitled to the benefits provided by Section 4 unless such termination is the result of the occurrence of one or more of the following events: (i) The Executive's death; (ii) If the Executive becomes permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, Executive immediately prior to the Change in Control; or (iii) Cause. If, during the Severance Period, the Executive's employment is terminated by the Company or any Subsidiary other than pursuant to Paragraph (i), (ii) or (iii) of this Subsection, the Executive will be entitled to the benefits provided by Section 4. (b) In the event of the occurrence of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary during the Severance Period with the right to the benefits provided in Section 4 upon the occurrence of one or more of the following events (regardless of whether any other reason, other than Cause as hereinabove provided, for such termination exists or has occurred, including without limitation other employment): 6 7 (i) Failure to elect or reelect or otherwise to maintain the Executive in the office or the position, or a substantially equivalent office or position, of or with the Company and/or a Subsidiary, as the case may be, which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a Director of the Corporation (or any successor thereto) if the Executive shall have been a Director of the Corporation immediately prior to the Change in Control; (ii) (A) A significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Company and any Subsidiary which the Executive held immediately prior to the Change in Control, (B) a reduction in the aggregate of the Executive's Base Pay and Incentive Pay received from the Company and any Subsidiary, or (C) the termination or denial of the Executive's rights to Employee Benefits or a reduction in the scope or value thereof, any of which is not remedied by the Company within 10 calendar days after receipt by the Corporation of written notice from the Executive of such change, reduction or termination, as the case may be; (iii) The liquidation, dissolution, merger, consolidation or reorganization of the Corporation or transfer of all or substantially all of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its business and/or assets have been transferred (directly or by operation of law) assumed all duties and obligations of the Company under this Agreement pursuant to Section 12(a); (iv) The Company relocates its principal executive offices, or requires the Executive to have his principal location of work changed, to any location that is in excess of 25 miles from the location thereof immediately prior to the Change in Control, or requires the Executive to travel away from his office in the course of discharging his responsibilities or duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to the Change in Control without, in either case, his prior written consent; or (v) Without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto. 7 8 (c) A termination by the Company pursuant to Subsection (a) of this Section or by the Executive pursuant to Subsection (b) of this Section will not affect any rights that the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company providing Employee Benefits, which rights shall be governed by the terms thereof. 4. SEVERANCE COMPENSATION. (a) If, following the occurrence of a Change in Control, the Company terminates the Executive's employment during the Severance Period other than pursuant to Section 3(a), or if the Executive terminates his employment pursuant to Section 3(b), the Company will pay to the Executive the following amounts within five business days after the Termination Date and continue to provide to the Executive the following benefits: (i) A lump sum payment in an amount equal to three times the sum of (A) Base Pay (at the highest rate in effect for any period prior to the Termination Date), plus (B) Incentive Pay (determined in accordance with the standards set forth in Section 1(i)). (ii)(A) For a period of 36 months following the Termination Date (the "Continuation Period"), the Company will arrange to provide the Executive with Employee Benefits that are welfare benefits (but not stock option, stock purchase, stock appreciation or similar compensatory benefits) substantially similar to those that the Executive was receiving or entitled to receive immediately prior to the Termination Date (or, if greater, immediately prior to the reduction, termination, or denial described in Section 3(b)(ii)), except that the level of any such Employee Benefits to be provided to the Executive may be reduced in the event of a corresponding reduction generally applicable to all recipients of or participants in such Employee Benefits, and (B) such Continuation Period will be considered service with the Company for the purpose of determining service credits and benefits due and payable to the Executive under the Company's retirement income, supplemental executive retirement and other benefit plans of the Company applicable to the Executive, his dependents or his beneficiaries immediately prior to the Termination Date. In addition, the Company shall provide the Executive, at the Executive's election, with either outplacement services by a firm selected by the Executive, at the expense of the Company in an amount up to 20% of the Executive's Base Pay, or reimbursement of reasonable outplacement expenses actually incurred by the Executive, in an amount up to 15% of the Executive's Base Pay. If and to the extent that any benefit described in Subparagraph (A) or (B) of this Paragraph 8 9 is not or cannot be paid or provided under any policy, plan, program or arrangement of the Company or any Subsidiary, as the case may be, then the Corporation will itself pay or provide for the payment to the Executive, his dependents and beneficiaries, of such Employee Benefits. Without otherwise limiting the purposes or effect of Section 5, Employee Benefits otherwise receivable by the Executive pursuant to Subparagraph (A) of this Paragraph will be reduced to the extent comparable welfare benefits are actually received by the Executive from another employer during the Continuation Period following the Executive's Termination Date, and any such benefits actually received by the Executive shall be reported by the Executive to the Corporation. If the continued health coverage under Subparagraph (A) of this Paragraph is provided through participation in the Company's group health plan, then following such period of continued health care coverage, the Executive will be eligible to elect to continue, for himself and his eligible dependents, health benefits in accordance with the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. (b) Upon the occurrence of any of the events described in the third paragraph of Section 8 of the Company's Stock Option Plan, each stock option granted to the Executive under such Plan then outstanding but not exercisable shall immediately become and be exercisable in full in accordance with the terms of such Plan and the applicable option agreement between the Corporation and the Executive. (c) Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on the amount or value thereof at an annualized rate of interest equal to the "prime rate" as quoted from time to time during the relevant period in the Northeast Edition of THE WALL STREET JOURNAL. Such interest will be payable as it accrues on demand. Any change in such prime rate will be effective on and as of the date of such change. (d) Notwithstanding any provision of this Agreement to the contrary, the parties' respective rights and obligations under this Section and under Sections 6 and 8 will survive any termination or expiration of this Agreement or the termination of the Executive's employment following a Change in Control for any reason whatsoever. 5. QUALIFIED PLAN BENEFITS. Upon the occurrence of a Change in Control, the Executive's account in the Belden & Blake Corporation 401(k) Profit Sharing Plan shall be come 100% vested and nonforfeitable. 9 10 6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event that this Agreement shall become operative and it shall be determined (as hereafter provided) that any payment or distribution by the Company or any of its affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any successor provision thereto) by reason of being considered "contingent on a change in ownership or control" of the Corporation, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (collectively, a "Gross-Up Payment"); PROVIDED, HOWEVER, that no Gross-up Payment shall be made with respect to the Excise Tax, if any, attributable to (i) any incentive stock option, as defined by Section 422 of the Code ("ISO") granted prior to the execution of this Agreement, or (ii) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO described in clause (i). The Gross-Up Payment shall be in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the provisions of Subsection (f) of this Section, all determinations required to be made under this Section, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, if any, shall be made by a nationally recognized accounting firm (the "Accounting Firm") selected by the Executive in his sole discretion. The Executive shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within 30 calendar days after the Termination Date, if applicable, and any such other time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by 10 11 the Executive, the Company shall pay the required Gross-Up Payment to the Executive within five business days after receipt of such determination and calculations with respect to any Payment to the Executive. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Company and the Executive an opinion that the Executive has substantial authority not to report any Excise Tax on his federal, state or local income or other tax return. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Subsection (f) of this Section and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (c) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Subsection (b) of this Section. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive. (d) The federal, state and local income or other tax returns filed by the Executive shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Payment, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal 11 12 income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (e) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Subsection (b) of this Section shall be borne by the Company. If such fees and expenses are initially paid by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his payment thereof. (f) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as promptly as practicable but no later than 10 business days after the Executive actually receives notice of such claim and the Executive shall further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by the Executive). The Executive shall not pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (ii) the date that any payment of amount with respect to such claim is due. If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company; (iii) cooperate with the Company in good faith in order effectively to contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; 12 13 PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and shall indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Subsection, the Company shall control all proceedings taken in connection with the contest of any claim contemplated by this Subsection and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that the Executive may participate therein at his own cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; PROVIDED, HOWEVER, that if the Company directs the Executive to pay the tax claimed and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto, imposed with respect to such advance; and PROVIDED FURTHER, HOWEVER, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (g) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Subsection (f) of this Section, the Executive receives any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Subsection (f) of this Section) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Subsection (f) of this Section, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar 13 14 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of any such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to the Executive pursuant to this Section. 7. NO MITIGATION OBLIGATION. The Company hereby acknowledges that it will be difficult and may be impossible for the Executive to find reasonably comparable employment following the Termination Date and that the non-competition covenant contained in Section 9 will further limit the employment opportunities for the Executive. In addition, the Company acknowledges that its severance pay plans applicable in general to its salaried employees do not provide for mitigation, offset or reduction of any severance payment received thereunder. Accordingly, the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable, and the Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise, except as expressly provided in the last sentence of Section 4(a)(ii). 8. LEGAL FEES AND EXPENSES. (a) It is the intent of the Company that the Executive not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Executive's entering into an attorney-client relationship with such counsel, and 14 15 in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys' and related fees and expenses incurred by the Executive in connection with any of the foregoing. (b) Without limiting the obligations of the Company pursuant to Subsection (a) of this Section, in the event a Change in Control occurs, the performance of the Company's obligations under this Section shall be secured by amounts deposited or to be deposited in trust pursuant to certain trust agreements to which the Corporation shall be a party, which amounts deposited shall in the aggregate be not less than $250,000, providing that the fees and expenses of counsel selected from time to time by the Executive pursuant to Subsection (a) of this Section shall be paid, or reimbursed to the Executive if paid by the Executive, either in accordance with the terms of such trust agreements, or, if not so provided, on a regular, periodic basis upon presentation by the Executive to the trustee of a statement or statements prepared by such counsel in accordance with its customary practices. Any failure by the Company to satisfy any of its obligations under this Subsection shall not limit the rights of the Executive hereunder. Subject to the foregoing, the Executive shall have the status of a general unsecured creditor of the Company and shall have no right to, or security interest in, any assets of the Company or any Subsidiary. 9. COMPETITIVE ACTIVITY; CONFIDENTIAL INFORMATION. (a) During a period ending one year following the Termination Date, if the Executive shall have received or shall be receiving benefits under Section 4, and, if applicable, Section 6, the Executive shall not, without the prior written consent of the Company, which consent shall not be unreasonably withheld, engage in any Competitive Activity. (b)(i) The Executive acknowledges and agrees that in the performance of his duties as an officer and employee of the Company, he was and may be brought into frequent contact with, had or may have had access to, and/or became or may become informed of confidential and proprietary information of the Company and/or information which is a trade secret of the Company (collectively, "Confidential Information"), as more fully described in Paragraph (ii) of this Subsection. The Executive acknowledges and agrees that the Confidential Information of the Company gained by the Executive during his association with the Company was or will be developed by and/or for the Company through 15 16 substantial expenditure of time, effort and money and constitutes valuable and unique property of the Company. (ii) The Executive will keep in strict confidence, and will not, directly or indirectly, at any time, disclose, furnish, disseminate, make available, use or suffer to be used in any manner any Confidential Information of the Company without limitation as to when or how the Executive may have acquired such Confidential Information. The Executive specifically acknowledges that Confidential Information includes any and all information, whether reduced to writing (or in a form from which information can be obtained, translated, or derived into reasonably usable form), or maintained in the mind or memory of the Executive and whether compiled or created by the Company, which derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from the disclosure or use of such information, that reasonable efforts have been put forth by the Company to maintain the secrecy of Confidential Information, that such Confidential Information is and will remain the sole property of the Company, and that any retention or use by the Executive of Confidential Information after the termination of the Executive's employment with and services for the Company shall constitute a misappropriation of the Company's Confidential Information. (iii) The Executive further agrees that he shall return, within ten (10) days of the effective date of his termination as an employee of the Company, in good condition, all property of the Company then in his possession, including, without limitation, (A) property, documents and/or all other materials (including copies, reproductions, summaries and/or analyses) which constitute, refer or relate to Confidential Information of the Company, (B) keys to Company property, (C) files and (D) blueprints or other drawings. (iv) The Executive further acknowledges and agrees that his obligation of confidentiality shall survive, regardless of any other breach of this Agreement or any other agreement, by any party hereto, until and unless such Confidential Information of the Company shall have become, through no fault of the Executive, generally known to the public or the Executive is required by law (after providing the Company with notice and opportunity to contest such requirement) to make disclosure. The Executive's obligations under this Subsection are in addition to, and not in limitation or 16 17 preemption of, all other obligations of confidentiality which the Executive may have to the Company under general legal or equitable principles or statutes. 10. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement will create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or following any Change in Control. Any termination of employment of the Executive or the removal of the Executive from the office or position in the Company or any Subsidiary prior to a Change in Control but following the commencement of any discussion with any third person that ultimately results in a Change in Control shall be deemed to be a termination or removal of the Executive after a Change in Control for purposes of this Agreement. 11. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any law or government regulation or ruling. 12. SUCCESSORS AND BINDING AGREEMENT. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company. (b) This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees. (c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Subsections (a) and (b) of this Section. Without limiting the generality or effect of the foregoing, the Executive's right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by 17 18 a transfer by Executive's will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Subsection, the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated. 13. NOTICES. For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express or UPS, addressed to the Corporation (to the attention of the Secretary of the Corporation) at its principal executive office and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 14. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Ohio, without giving effect to the principles of conflict of laws of such State. 15. VALIDITY. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal. 16. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Corporation. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes and completely replaces any prior severance or employment agreement previously applicable to the Executive. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. References to Sections are to references to Sections of this Agreement. 18 19 17. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. BELDEN & BLAKE CORPORATION By: ________________________ Title:______________________ ____________________________ [Executive] 19 EX-10.4 5 EXHIBIT 10.4 1 Exhibit 10.4 SEVERANCE AGREEMENT ------------------- THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of October 25, 1996, is made and entered into by and between Belden & Blake Corporation, an Ohio corporation (the "Corporation"), and _____________ (the "Executive"). WITNESSETH: ----------- WHEREAS, the Executive is a senior executive or a key employee of the Company (as defined herein) and has made and is expected to continue to make major contributions to the short- and long-term profitability, growth and financial strength of the Company; WHEREAS, the Company recognizes that, as is the case for most publicly held companies, the possibility of a Change in Control (as defined below) exists; WHEREAS, the Company desires to assure itself of both present and future continuity of management and desires to establish certain minimum severance benefits for certain of its senior executives, including the Executive, applicable in the event of a Change in Control; WHEREAS, the Company wishes to ensure that its senior executives are not practically disabled from discharging their duties in respect of a proposed or actual transaction involving a Change in Control; and WHEREAS, the Company desires to provide additional inducement for the Executive to continue to remain in the ongoing employ of the Company. NOW, THEREFORE, the Company and the Executive agree as follows: 1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement with initial capital letters: (a) "Base Pay" means the Executive's annual base salary at a rate not less than the Executive's annual fixed or base compensation as in effect for Executive immediately prior to the occurrence of a Change in Control or such higher rate as may be determined from time to time by the Board or a committee thereof. "Base Pay" shall include any portion of the Executive's annual base salary the receipt of which the Executive has elected to defer. (b) "Board" means the Board of Directors of the Corporation. 2 (c) "Cause" means that, prior to any termination pursuant to Section 3(b), the Executive shall have committed: (i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company; (ii) intentional wrongful damage to property of the Company; or (iii) intentional wrongful disclosure of secret processes or confidential information of the Company; and any such act shall have been materially harmful to the Company. For purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the Board then in office at a meeting of the Board called and held for such purpose, after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel (if the Executive chooses to have counsel present at such meeting), to be heard before the Board, finding that, in the good faith opinion of the Board, the Executive had committed an act constituting "Cause" as herein defined and specifying the particulars thereof in detail. Nothing herein will limit the right of the Executive or his beneficiaries to contest the validity or propriety of any such determination. (d) "Change in Control" means the occurrence during the Term of any of the following events: (i) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding Voting Stock of the corporation or person surviving such merger, consolidation or reorganization, immediately after such transaction, are beneficially held, directly or indirectly, in the aggregate by the beneficial holders of Voting Stock of the Corporation immediately prior to such transaction; 2 3 (ii) The Corporation sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the then-outstanding Voting Stock of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Corporation immediately prior to such sale or transfer; (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 25% or more of the combined voting power of the then-outstanding Voting Stock of the Corporation; (iv) The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (v) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof; PROVIDED, HOWEVER, that for purposes of this clause (v) each Director who is first elected, or first nominated for election by the Corporation's stockholders, by a vote of at least two-thirds of the Directors of the Corporation (or a committee thereof) then still in office who were Directors of the Corporation at the beginning of any such period will be deemed to have been a Director of the Corporation at the beginning of such period. Notwithstanding the foregoing provisions of Paragraph (iii) or (iv) of this Subsection, unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of Paragraph (iii) or (iv) of this Subsection solely because (A) the Corporation, (B) a Subsidiary, (C) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company, (D) any person or group of which employees of the Company or a Subsidiary control a greater 3 4 than 25% interest unless the Board determines that such person or group is making a "hostile acquisition", or (E) any person or group of which the Executive is an affiliate either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 25% or otherwise, or because the Corporation reports that a change in control of the Corporation has occurred or will occur in the future by reason of such beneficial ownership. (e) "Company" means the Corporation and its Subsidiaries. (f) "Employee Benefits" means the perquisites, benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter by the Company, providing perquisites, benefits and service credit for benefits at least as great in the aggregate as are payable thereunder prior to a Change in Control. (g) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (h) "Incentive Pay" means an annual amount equal to not less than the highest aggregate annual bonus (whether paid in cash or stock and regardless of any election to defer actual payment of all or any portion of such bonus), incentive or other payments of compensation (including the stock portion of the profit-sharing payment contributed by the Company to the Belden & Blake Corporation 401(k) Profit Sharing Plan, but not cash or stock payments in lieu of distributions of restricted stock which vested in any year or stock options), in addition to Base Pay, made or to be made in regard to services rendered in any calendar year during the three calendar years immediately preceding the year in which the Change in Control occurred pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or 4 5 arrangement (whether or not funded) of the Company, or any successor thereto providing benefits at least as great as the benefits payable thereunder prior to a Change in Control. (i) "Severance Period" means the period of time commencing on the date of the first occurrence of a Change in Control and continuing until the earliest of (i) the second anniversary of the occurrence of the Change in Control, (ii) the Executive's death, or (iii) the Executive's attainment of age 65. (j) "Subsidiary" means an entity in which the Company directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock. (k) "Term" means the period commencing as of the date hereof and expiring as of the later of (i) the close of business on December 31, 1998, or (ii) the expiration of the Severance Period; PROVIDED, HOWEVER, that (A) commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement will automatically be extended for an additional year unless, not later than September 30 of the immediately preceding year, the Corporation or the Executive shall have given notice that it or the Executive, as the case may be, does not wish to have the Term extended and (B) subject to the last sentence of Section 10, if, prior to a Change in Control, the Executive ceases for any reason to be an employee of the Company and any Subsidiary, thereupon without further action the Term shall be deemed to have expired and this Agreement will immediately terminate and be of no further effect. For purposes of this Subsection, the Executive shall not be deemed to have ceased to be an employee of the Company and any Subsidiary by reason of the transfer of Executive's employment between the Corporation and any Subsidiary, or among any Subsidiaries. (l) "Termination Date" means the date on which the Executive's employment with the Company is terminated (the effective date of which shall be the date of termination, or such other date that may be specified by the Executive if the termination is pursuant to Section 3(b)). (m) "Voting Stock" means securities entitled to vote generally in the election of directors. 2. OPERATION OF AGREEMENT. This Agreement will be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, this Agreement will not be operative unless and until a Change in Control occurs. Upon the occurrence of a Change in Control at any time during the Term, without further action, this Agreement shall become immediately operative. 5 6 3. TERMINATION FOLLOWING A CHANGE IN CONTROL. (a) In the event of the occurrence of a Change in Control, the Executive's employment may be terminated by the Company during the Severance Period and the Executive shall be entitled to the benefits provided by Section 4 unless such termination is the result of the occurrence of one or more of the following events: (i) The Executive's death; (ii) If the Executive becomes permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, Executive immediately prior to the Change in Control; or (iii) Cause. If, during the Severance Period, the Executive's employment is terminated by the Company or any Subsidiary other than pursuant to Paragraph (i), (ii) or (iii) of this Subsection, the Executive will be entitled to the benefits provided by Section 4. (b) In the event of the occurrence of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary during the Severance Period with the right to the benefits provided in Section 4 upon the occurrence of one or more of the following events (regardless of whether any other reason, other than Cause as hereinabove provided, for such termination exists or has occurred, including without limitation other employment): (i) Failure to elect or reelect or otherwise to maintain the Executive in the office or the position, or a substantially equivalent office or position, of or with the Company and/or a Subsidiary, as the case may be, which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a Director of the Corporation (or any successor thereto) if the Executive shall have been a Director of the Corporation immediately prior to the Change in Control; (ii) (A) A significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Company and any Subsidiary which the Executive held immediately prior to the Change in Control, (B) a reduction in the aggregate of the Executive's Base Pay and Incentive Pay received from the Company and any Subsidiary, or (C) the termination or denial of the Executive's rights to Employee Benefits or a reduction in the scope or value thereof, any of which is not remedied by the Company within 10 calendar days after receipt by the Corporation of written notice 6 7 from the Executive of such change, reduction or termination, as the case may be; (iii) The liquidation, dissolution, merger, consolidation or reorganization of the Corporation or transfer of all or substantially all of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its business and/or assets have been transferred (directly or by operation of law) assumed all duties and obligations of the Company under this Agreement pursuant to Section 12(a); (iv) The Company relocates its principal executive offices, or requires the Executive to have his principal location of work changed, to any location that is in excess of 25 miles from the location thereof immediately prior to the Change in Control, or requires the Executive to travel away from his office in the course of discharging his responsibilities or duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to the Change in Control without, in either case, his prior written consent; or (v) Without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto. (c) A termination by the Company pursuant to Subsection (a) of this Section or by the Executive pursuant to Subsection (b) of this Section will not affect any rights that the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company providing Employee Benefits, which rights shall be governed by the terms thereof. 4. SEVERANCE COMPENSATION. (a) If, following the occurrence of a Change in Control, the Company terminates the Executive's employment during the Severance Period other than pursuant to Section 3(a), or if the Executive terminates his employment pursuant to Section 3(b), the Company will pay to the Executive the following amounts within five business days after the Termination Date and continue to provide to the Executive the following benefits: (i) A lump sum payment in an amount equal to two times the sum of (A) Base Pay (at the highest rate in effect for any period prior to the Termination Date), 7 8 plus (B) Incentive Pay (determined in accordance with the standards set forth in Section 1(h)). (ii) (A) For a period of 36 months following the Termination Date (the "Continuation Period"), the Company will arrange to provide the Executive with Employee Benefits that are welfare benefits (but not stock option, stock purchase, stock appreciation or similar compensatory benefits) substantially similar to those that the Executive was receiving or entitled to receive immediately prior to the Termination Date (or, if greater, immediately prior to the reduction, termination, or denial described in Section 3(b)(ii)), except that the level of any such Employee Benefits to be provided to the Executive may be reduced in the event of a corresponding reduction generally applicable to all recipients of or participants in such Employee Benefits, and (B) such Continuation Period will be considered service with the Company for the purpose of determining service credits and benefits due and payable to the Executive under the Company's retirement income, supplemental executive retirement and other benefit plans of the Company applicable to the Executive, his dependents or his beneficiaries immediately prior to the Termination Date. In addition, the Company shall provide the Executive, at the Executive's election, with either outplacement services by a firm selected by the Executive, at the expense of the Company in an amount up to 20% of the Executive's Base Pay, or reimbursement of reasonable outplacement expenses actually incurred by the Executive, in an amount up to 15% of the Executive's Base Pay. If and to the extent that any benefit described in Subparagraph (A) or (B) of this Paragraph is not or cannot be paid or provided under any policy, plan, program or arrangement of the Company or any Subsidiary, as the case may be, then the Company will itself pay or provide for the payment to the Executive, his dependents and beneficiaries, of such Employee Benefits. Without otherwise limiting the purposes or effect of Section 6, Employee Benefits otherwise receivable by the Executive pursuant to Subparagraph (A) of this Paragraph will be reduced to the extent comparable welfare benefits are actually received by the Executive from another employer during the Continuation Period following the Executive's Termination Date, and any such benefits actually received by the Executive shall be reported by the Executive to the Corporation. If the continued health coverage under Subparagraph (A) of this Paragraph is provided through participation in the Company's group health plan, then following such period of continued health care coverage, the Executive will be eligible to elect to continue, for himself and his eligible dependents, health benefits in accordance with the 8 9 provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. (b) Upon the occurrence of any of the events described in the third paragraph of Section 8 of the Company's Stock Option Plan, each stock option granted to the Executive under such Plan then outstanding but not exercisable shall immediately become and be exercisable in full in accordance with the terms of such Plan and the applicable option agreement between the Corporation and the Executive. (c) Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on the amount or value thereof at an annualized rate of interest equal to the "prime rate" as quoted from time to time during the relevant period in the Northeast Edition of THE WALL STREET JOURNAL. Such interest will be payable as it accrues on demand. Any change in such prime rate will be effective on and as of the date of such change. (d) Notwithstanding any provision of this Agreement to the contrary, the parties' respective rights and obligations under this Section and under Sections 6 and 8 will survive any termination or expiration of this Agreement or the termination of the Executive's employment following a Change in Control for any reason whatsoever. 5. QUALIFIED PLAN BENEFITS. Upon the occurrence of a Change in Control, the Executive's account in the Belden & Blake Corporation 401(k) Profit Sharing Plan shall become 100% vested and nonforfeitable. 6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event that this Agreement shall become operative and it shall be determined (as hereafter provided) that any payment or distribution by the Corporation or any of its affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any successor provision thereto) by reason of being considered "contingent on a change in ownership or control" of the Corporation, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any 9 10 similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment or payments (collectively, a "Gross-Up Payment"); PROVIDED, HOWEVER, that no Gross-up Payment shall be made with respect to the Excise Tax, if any, attributable to (i) any incentive stock option, as defined by Section 422 of the Code ("ISO") granted prior to the execution of this Agreement, or (ii) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO described in clause (i). The Gross-Up Payment shall be in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the provisions of Subsection (f) of this Section, all determinations required to be made under this Section, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, if any, shall be made by a nationally recognized accounting firm (the "Accounting Firm") selected by the Executive in his sole discretion. The Executive shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within 30 calendar days after the Termination Date, if applicable, and any such other time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to the Executive within five business days after receipt of such determination and calculations with respect to any Payment to the Executive. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Company and the Executive an opinion that the Executive has substantial authority not to report any Excise Tax on his federal, state or local income or other tax return. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to 10 11 Subsection (f) of this Section and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations. (c) The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Subsection (b) of this Section. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive. (d) The federal, state and local income or other tax returns filed by the Executive shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount of any Excise Payment, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction. (e) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Subsection (b) of this Section shall be borne by the Company. If such fees and expenses are initially paid by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his payment thereof. (f) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the 11 12 payment by the Company of a Gross-Up Payment. Such notification shall be given as promptly as practicable but no later than 10 business days after the Executive actually receives notice of such claim and the Executive shall further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by the Executive). The Executive shall not pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (ii) the date that any payment of amount with respect to such claim is due. If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company; (iii) cooperate with the Company in good faith in order effectively to contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and shall indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Subsection, the Company shall control all proceedings taken in connection with the contest of any claim contemplated by this Subsection and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that the Executive may participate therein at his own cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, 12 13 as the Company shall determine; PROVIDED, HOWEVER, that if the Company directs the Executive to pay the tax claimed and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto, imposed with respect to such advance; and PROVIDED FURTHER, HOWEVER, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (g) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Subsection (f) of this Section, the Executive receives any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Subsection (f) of this Section) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Subsection (f) of this Section, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of any such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to the Executive pursuant to this Section. 7. NO MITIGATION OBLIGATION. The Company hereby acknowledges that it will be difficult and may be impossible for the Executive to find reasonably comparable employment following the Termination Date. In addition, the Company acknowledges that its severance pay plans applicable in general to its salaried employees do not provide for mitigation, offset or reduction of any severance payment received thereunder. Accordingly, the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable, and the Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part 13 14 of the Executive hereunder or otherwise, except as expressly provided in the last sentence of Section 4(a)(ii). 8. LEGAL FEES AND EXPENSES. (a) It is the intent of the Company that the Executive not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Executive's entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys' and related fees and expenses incurred by the Executive in connection with any of the foregoing. (b) Without limiting the obligations of the Company pursuant to Subsection (a) of this Section, in the event a Change in Control occurs, the performance of the Company's obligations under this Section shall be secured by amounts deposited or to be deposited in trust pursuant to certain trust agreements to which the Corporation shall be a party, which amounts deposited shall in the aggregate be not less than $250,000, providing that the fees and expenses of counsel selected from time to time by the Executive pursuant to Subsection (a) of this Section shall be paid, or reimbursed to the Executive if paid by the Executive, either in accordance with the terms of such trust agreements, or, if not so provided, on a regular, periodic basis upon presentation by the Executive to the trustee of a statement 14 15 or statements prepared by such counsel in accordance with its customary practices. Any failure by the Company to satisfy any of its obligations under this Subsection shall not limit the rights of the Executive hereunder. Subject to the foregoing, the Executive shall have the status of a general unsecured creditor of the Company and shall have no right to, or security interest in, any assets of the Company or any Subsidiary. 9. CONFIDENTIAL INFORMATION. (a) The Executive acknowledges and agrees that in the performance of his duties as an officer and/or employee of the Company, he was and may be brought into frequent contact with, had or may have had access to, and/or became or may become informed of confidential and proprietary information of the Company and/or information which is a trade secret of the Company (collectively, "Confidential Information"), as more fully described in Subsection (b) of this Section. The Executive acknowledges and agrees that the Confidential Information of the Company gained by the Executive during his association with the Company was or will be developed by and/or for the Company through substantial expenditure of time, effort and money and constitutes valuable and unique property of the Company. (b) The Executive will keep in strict confidence, and will not, directly or indirectly, at any time, disclose, furnish, disseminate, make available, use or suffer to be used in any manner any Confidential Information of the Company without limitation as to when or how the Executive may have acquired such Confidential Information. The Executive specifically acknowledges that Confidential Information includes any and all information, whether reduced to writing (or in a form from which information can be obtained, translated, or derived into reasonably usable form), or maintained in the mind or memory of the Executive and whether compiled or created by the Company, which derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from the disclosure or use of such information, that reasonable efforts have been put forth by the Company to maintain the secrecy of Confidential Information, that such Confidential Information is and will remain the sole property of the Company, and that any retention or use by the Executive of Confidential Information after the termination of the Executive's employment with and services for the Company shall constitute a misappropriation of the Company's Confidential Information. (c) The Executive further agrees that he shall return, within ten (10) days of the effective date of his termination as an employee of the Company, in good condition, all property of the Company then in his 15 16 possession, including, without limitation, (i) property, documents and/or all other materials (including copies, reproductions, summaries and/or analyses) which constitute, refer or relate to Confidential Information of the Company, (ii) keys to Company property, (iii) files and (iv) blueprints or other drawings. (d) The Executive further acknowledges and agrees that his obligation of confidentiality shall survive, regardless of any other breach of this Agreement or any other agreement, by any party hereto, until and unless such Confidential Information of the Company shall have become, through no fault of the Executive, generally known to the public or the Executive is required by law (after providing the Company with notice and opportunity to contest such requirement) to make disclosure. The Executive's obligations under this Section are in addition to, and not in limitation or preemption of, all other obligations of confidentiality which the Executive may have to the Company under general legal or equitable principles or statutes. 10. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement will create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or following any Change in Control. Any termination of employment of the Executive or the removal of the Executive from the office or position in the Company or any Subsidiary prior to a Change in Control but following the commencement of any discussion with any third person that ultimately results in a Change in Control shall be deemed to be a termination or removal of the Executive after a Change in Control for purposes of this Agreement. 11. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any law or government regulation or ruling. 12. SUCCESSORS AND BINDING AGREEMENT. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement), but will 16 17 not otherwise be assignable, transferable or delegable by the Company. (b) This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees. (c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Subsections (a) and (b) of this Section. Without limiting the generality or effect of the foregoing, the Executive's right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by Executive's will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Subsection, the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated. 13. NOTICES. For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express or UPS, addressed to the Corporation (to the attention of the Secretary of the Corporation) at its principal executive office and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 14. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Ohio, without giving effect to the principles of conflict of laws of such State. 15. VALIDITY. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal. 17 18 16. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Corporation. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes and completely replaces any prior severance or employment agreement previously applicable to the Executive. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. References to Sections are to references to Sections of this Agreement. 17. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. BELDEN & BLAKE CORPORATION By:_______________________ Title:____________________ ___________________________ [Executive] 18 EX-10.5 6 EXHIBIT 10.5 1 Exhibit 10.5 SEVERANCE PAY PLAN FOR KEY EMPLOYEES OF BELDEN & BLAKE CORPORATION 1. GENERAL STATEMENT OF PURPOSE. With the high level of corporate acquisition and restructuring activity over the past several years, employees are understandably concerned about their careers and their personal financial security. As a result, even rumors of acquisitions and restructuring cause employees to consider major career changes in an effort to assure financial security for themselves and their families. This Severance Pay Plan for Key Employee of Belden & Blake Corporation (the "Plan") is designed to assure fair treatment of Key Employees (as defined below) in the event of a Change in Control (as defined below). In such circumstances, it would permit Key Employees to make critical career decisions in an atmosphere free of time pressure and financial uncertainty, increasing their willingness to remain with Belden & Blake Corporation (the "Corporation") notwithstanding the outcome of a possible Change in Control. 2. EFFECTIVE AND TERMINATION DATES. The Plan shall be effective as of October 1, 1996 (the "Effective Date"). The Plan will automatically terminate on December 31, 1998 (the "Termination Date"), if there has been no Change in Control prior to such date. 3. 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 otherwise: a. AVERAGE INCENTIVE PAY. The term "Average Incentive Pay" shall mean an amount which is the greater of (i) the average amount of Incentive Pay awarded to the Key Employee for the three calendar years immediately prior to the Key Employee's termination of employment (whether or not paid in such calendar years) or (ii) the amount of the most recent award of Incentive Pay. b. BASE SALARY. The term "Base Salary" shall mean, with respect to each Key Employee, the annual base compensation of such Key Employee at the rate in effect immediately prior to the Change in Control or at such higher rate as may be in effect immediately prior to the Key Employee's termination of employment. "Base Salary" shall include any portion of the Key Employee's annual base compensation the receipt of which the Key Employee has elected to defer. 2 2 c. BOARD. The term "Board" shall mean the board of directors of the Corporation. d. CAUSE. The term "Cause" shall mean that, prior to any termination of employment pursuant to Section 4.b., the Key Employee shall have committed: i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company; (ii) intentional wrongful damage to property of the Company; or (iii) intentional wrongful disclosure of secret processes or confidential information of the Company; and any such act shall have been materially harmful to the Company or any Subsidiary. For purposes of the Plan, no act or failure to act on the part of the Key Employee shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done or omitted to be done by the Key Employee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Key Employee shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall have been delivered to the Key Employee a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the Board then in office at a meeting of the Board called and held for such purpose, after reasonable notice to the Key Employee and an opportunity for the Key Employee, together with his counsel (if the Key Employee chooses to have counsel present at such meeting), to be heard before the Board, finding that, in the good faith opinion of the Board, the Key Employee had committed an act constituting "Cause" as herein defined and specifying the particulars thereof in detail. Nothing herein will limit the right of the Key Employee or his beneficiaries to contest the validity or propriety of any such determination. e. CHANGE IN CONTROL. The term "Change in Control" shall mean the occurrence of any of the following events: (i) The Corporation is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding Voting Stock of the corporation or person surviving such merger, consolidation or reorganization, 3 3 immediately after such transaction, are beneficially held, directly or indirectly, in the aggregate by the beneficial holders of Voting Stock of the Corporation immediately prior to such transaction; (ii) The Corporation sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the then-outstanding Voting Stock of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Corporation immediately prior to such sale or transfer; (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 25% or more of the combined voting power of the then-outstanding Voting Stock of the Corporation; (iv) The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Corporation has occurred or will occur in the future pursuant to any then-existing contract or transaction; or (v) If, during any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Corporation cease for any reason to constitute at least a majority thereof; provided, however, that for purposes of this clause each director who is first elected, or first nominated for election by the Corporation's stockholders, by a vote of at least two-thirds of the directors of the Corporation (or a committee thereof) then still in office who were directors of the Corporation at the beginning of any such period will be deemed to have been a director of the Corporation at the beginning of such period. 4 4 Notwithstanding the foregoing provisions of Paragraph (iii) or (iv) of this Subsection, unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of Paragraph (iii) or (iv) of this Subsection solely because (A) the Corporation, (B) a Subsidiary, (C) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company, (D) any person or group of which employees of the Company control a greater than 25% interest unless the Board determines that such person or group is making a "hostile acquisition", or (E) any person or group of which the Executive is an affiliate either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 25% or otherwise, or because the Corporation reports that a change in control of the Corporation has occurred or will occur in the future by reason of such beneficial ownership. f. CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as amended. g. COMMITTEE. The term "Committee" shall mean the Compensation Committee of the Board. h. COMPANY. The term "Company" shall mean the Corporation and its Subsidiaries. i. EXCHANGE ACT. The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. j. INCENTIVE PAY. The term "Incentive Pay" shall mean the annual compensation and award (whether paid in cash or stock and regardless or any election to defer actual payment of all or any portion of such award, but not including stock options) allocated to a Key Employee pursuant to any incentive compensation plans and arrangements of the Company. "Incentive Pay" shall include the stock portion of the profit-sharing payment contributed by the Company to the Belden & Blake Corporation 401(k) Profit Sharing Plan. k. KEY EMPLOYEE. The term "Key Employee" shall mean any employee of the Company who is identified on Exhibit A hereto. Notwithstanding the foregoing, employees who would otherwise be Key Employees shall not be Key Employees for purposes of the Plan if they have entered into an employment agreement, severance agreement or similar arrangement with the Company providing for the payment of severance 5 5 compensation in specified circumstances following a Change in Control. In addition, the term "Key Employee" shall include such other employees of the Company as shall be designated in writing by, or in minutes of the actions of, the Committee. l. SEVERANCE PAY. The term "Severance Pay" shall mean the amount payable as set forth in Section 5.a. of the Plan. m. SUBSIDIARY. The term "Subsidiary" shall mean an entity in which the Corporation directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock. n. VOTING STOCK. The term "Voting Stock" shall mean securities entitled to vote generally in the election of directors. 4. ELIGIBILITY UNDER THE PLAN. a. Subject to the limitations described below, the Plan applies to Key Employees who are employed on the date that a Change in Control occurs. The Corporation reserves the right, at any time prior to the occurrence of a Change in Control, to amend, modify, change or terminate the Plan with or without notice or any liability to Key Employees. The Plan shall not be amended, modified, changed or terminated after the occurrence of a Change in Control without the written consent of each Key Employee. b. A Key Employee will be eligible for Severance Compensation and other benefits under the Plan if, within two (2) years after the occurrence of a Change in Control: (i) The Key Employee's employment with the Company is terminated by the Company other than for Cause. (ii) The Key Employee voluntarily terminates his employment with the Company following the occurrence of any of the following events: (A) The failure to elect, reelect or otherwise maintain the Key Employee in the office or position in the Company which the Key Employee held immediately prior to the Change in Control; (B) A reduction in the Key Employee's Base Salary in effect immediately prior to the Change in Control, or a reduction in the Key Employee's opportunity for Incentive Pay or a reduction or 6 6 termination of any benefits described in Section 5.b. to which the Key Employee was entitled immediately prior to the Change in Control; (C) The liquidation, dissolution, merger, consolidation or reorganization of the Corporation or the transfer of all or a significant portion of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization or otherwise) to which all or a significant portion of its business and/or assets have been transferred (directly or by operation of law) shall have assumed all duties and obligations of the Company under the Plan pursuant to Section 15; or (D) The Company relocates its principal executive offices, requires the Key Employee to change his principal location of work to any location which is in excess of 25 miles from the location thereof immediately prior to the Change in Control, or requires the Key Employee to travel away from his office in the course of discharging his responsibilities or duties hereunder significantly more (in terms of either consecutive days or aggregate days in any calendar year) than was required of him prior to the Change in Control, without, in any case, his prior written consent. 5. SEVERANCE COMPENSATION. a. SEVERANCE PAY. Each Key Employee who is terminated in accordance with Section 4.b. shall, within five (5) business days after such termination, receive Severance Pay from the Company in a lump sum payment (the "Severance Payment") in an amount equal to one times the Key Employee's Base Salary plus his Average Incentive Pay. b. HEALTH AND LIFE BENEFITS. Each Key Employee who is terminated in accordance with Section 4.b., may continue, for himself and his eligible dependents, health and life insurance benefits for the one year period immediately following his termination of employment. During any period of continued coverage pursuant to this Section, the Key Employee will be required to pay the same cost of coverage, co-pays, deductibles and other similar payments paid by active employees of the Company having elected the same type of coverage. The Key Employee shall cease to be eligible for continued health and life insurance benefits provided by the Company if he (i) waives such coverage, (ii) fails to 7 7 pay any amount required for such coverage or (iii) becomes eligible for other group health coverage. Following such one year period, the Key Employee shall be eligible to elect to continue, for himself and his eligible dependents, health benefits in accordance with the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. c. STOCK OPTIONS. Upon the occurrence of any of the events described in the third paragraph of Section 8 of the Corporation's Stock Option Plan, each stock option granted to the Key Employee under such Plan then outstanding but not exercisable shall immediately become and be exercisable in full in accordance with the terms of such Plan and the applicable option agreement between the Corporation and the Key Employee. d. OUTPLACEMENT COUNSELING. Each Key Employee who is terminated in accordance with Section 4.b. shall be reimbursed by the Company for reasonable expenses incurred for outplacement counseling (i) which are pre-approved by the Company's Manager of Human Resources, (ii) which do not exceed 15% of the Key Employee's Base Salary and (iii) which are incurred by the Key Employee within six (6) months following such termination. e. CALCULATION. The calculation of all payments of compensation and other benefits to be provided to each affected Key Employee under the Plan shall be made by the Company. 6. QUALIFIED PLAN BENEFITS. Upon the occurrence of a Change in Control a Key Employee's account in the Belden & Blake Corporation 401(k) Profit Sharing Plan shall become 100% vested and nonforfeitable. 7. LIMITATION AND INDEMNIFICATION. a. Notwithstanding anything in the Plan to the contrary, the Company shall not be obligated to pay to any Key Employee any amount of money, or provide the Key Employee with any benefits, which are in excess of the then maximum amount which the Company can deduct for federal income tax purposes. b. Without limiting the generality of paragraph a. of this Section, if any Key Employee is a "disqualified individual", as defined in Section 280G(c) of the Code, the present value of payments under the Plan made to the Key Employee shall not in the aggregate be greater than the excess, if any, of (i) 299% of the Key Employee's "base amount", as determined under Section 280G of the Code, over 8 8 (ii) the aggregate present value of all payments in the nature of compensation (other than the payments under the Plan) to or for the Key Employee's benefit that are considered "contingent on a change" in ownership or control of the Corporation as determined under Section 280G(b)(2) of the Code. If the application of the preceding sentence should require a reduction in benefits, such reduction shall be implemented first, by reducing any non-cash benefits to the extent necessary, and second, by reducing any cash benefits to the extent necessary. In each case, the reductions shall be made starting with the latest payment or benefit. In no event, however, will any benefit be reduced to the extent such benefit is specifically excluded by Section 280G(b) of the Code as a "parachute payment" or as an "excess parachute payment". Any decisions regarding the requirement or implementation of such reductions shall be made by Jones, Day, Reavis & Pogue or such other tax counsel selected by the Corporation's independent accountants and acceptable to the Key Employee. c. Unless otherwise prohibited by applicable law, if, notwithstanding the application of paragraph b. of this Section, an amount paid to the Key Employee under the Plan is subject to the excise tax imposed by Section 4999 of the Code, the Company shall pay to the Key Employee an additional amount in cash (the "Additional Payment") equal to the amount necessary to cause the aggregate remuneration received by the Key Employee under the Plan, including such additional cash payment (net of all federal, state and local income taxes and all taxes payable as the result of the application of Sections 280G and 4999 of the Code to be equal to the aggregate remuneration the Key Employee would have received, excluding such Additional Payment (net of all federal, state and local income taxes), as if Sections 280G and 4999 of the Code had not been enacted into law. 8. MITIGATION. A Key Employee shall not be required to mitigate the amount of any payment or benefit provided for in the Plan by seeking other employment or otherwise. 9. TIMING OF SEVERANCE PAY, ETC. Severance Pay and the Additional Payment are not included as earnings for the purpose of calculating contributions or benefits under any employee benefit plan of the Company. Severance Pay and the Additional Payment shall not be made from any benefit plan funds, and shall constitute an unfunded unsecured obligation of the Company. Severance Pay shall be paid in a lump sum on the date of termination or promptly thereafter. The Additional Payment shall be paid in a lump sum as soon as practicable after the amount of such Payment has been calculated. Severance Pay and the Additional Payment shall be net of any income, excise or 9 9 employment taxes which are required to be withheld from such payment. 10. CONFIDENTIALITY; CONFIDENTIAL INFORMATION. Payment of Severance Pay and benefits set forth in Section 5 to a Key Employee is conditioned upon the Key Employee agreeing in writing with the Company that: a. The Key Employee acknowledges and agrees that in the performance of his duties as an employee of the Company, he was brought into frequent contact with, had access to, and became informed of confidential and proprietary information of the Company and/or information which is a trade secret of the Company (collectively, "Confidential Information"), as more fully described in Subsection b. of this Section. The Key Employee acknowledges and agrees that the Confidential Information of the Company gained by the Key Employee during his association with the Company was developed by and/or for the Company through substantial expenditure of time, effort and money and constitutes valuable and unique property of the Company. b. The Key Employee will keep in strict confidence, and will not, directly or indirectly, at any time, disclose, furnish, disseminate, make available, use or suffer to be used in any manner any Confidential Information of the Company without limitation as to when or how the Key Employee may have acquired such Confidential Information. The Key Employee specifically acknowledges that Confidential Information includes any and all information, whether reduced to writing (or in a form from which information can be obtained, translated, or derived into reasonably usable form), or maintained in the mind or memory of the Key Employee and whether compiled or created by the Company, which derives independent economic value from not being readily known to or ascertainable by proper means by others who can obtain economic value from the disclosure or use of such information, that reasonable efforts have been put forth by the Company to maintain the secrecy of Confidential Information, that such Confidential Information is and will remain the sole property of the Company, and that any retention or use by the Key Employee of Confidential Information after the termination of the Executive's employment with and services for the Company shall constitute a misappropriation of the Company's Confidential Information. c. The Key Employee further agrees that he shall return, within ten (10) days of the effective date of his termination as an employee of the Company, in good condition, all property of the Company then in his possession, including, without limitation, (i) property, 10 10 documents and/or all other materials (including copies, reproductions, summaries and/or analyses) which constitute, refer or relate to Confidential Information of the Company, (ii) keys to Company property, (iii) files and (iv) blueprints or other drawings. d. The Key Employee further acknowledges and agrees that his obligation of confidentiality shall survive until and unless such Confidential Information of the Company shall have become, through no fault of the Key Employee, generally known to the public or the Key Employee is required by law (after providing the Company with notice and opportunity to contest such requirement) to make disclosure. The Key Employee's obligations under this Subsection are in addition to, and not in limitation or preemption of, all other obligations of confidentiality which the Key Employee may have to the Company under general legal or equitable principles or statutes. 11. RELEASE. Payment of the Severance Pay and benefits set forth in Section 5 to a Key Employee is conditioned upon the Key Employee executing and delivering a release satisfactory to the Corporation releasing the Company from any and all claims, demands, damages, actions and/or causes of action whatsoever, which he may have had on account of the termination of his employment, including, but not limited to claims of discrimination, including on the basis of sex, race, age, national origin, religion, or handicapped status (with all applicable periods during which the Key Employee may revoke the release or any provision thereof having expired), and any and all claims, demands and causes of action for retirement (other than under the Belden & Blake Corporation Employees 401(k) Profit Sharing Plan or under any "welfare benefit plan" of the Company (as the term "welfare benefit plan" is defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended)), severance or other termination pay, and because, pursuant to Section 5.a., the Key Employee is entitled to lump sum payments of Incentive Pay under the incentive compensation plans and arrangements of the Company described in Section 3.d. Such release shall not, however, apply to the ongoing obligations of the Company arising under the Plan, or rights of indemnification the Key Employee may have under the Company's policies or by contract or by statute. 12. LEGAL FEES AND EXPENSES. a. It is the intent of the Company that the Key Employee not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of his rights under the Plan by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be 11 11 extended to the Key Employee hereunder. Accordingly, if it should appear to the Key Employee that the Company has failed to comply with any of its obligations under the Plan or in the event that the Company or any other person takes or threatens to take any action to declare the Plan void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Key Employee the benefits provided or intended to be provided to the Key Employee hereunder, the Company irrevocably authorizes the Key Employee from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to advise and represent the Key Employee in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Key Employee's entering into an attorney-client relationship with such counsel, and in that connection the Company and the Key Employee agree that a confidential relationship shall exist between the Key Employee and such counsel. Without respect to whether the Key Employee prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys' and related fees and expenses incurred by the Key Employee in connection with any of the foregoing. b. Without limiting the obligations of the Company pursuant to Subsection a. of this Section, in the event a Change in Control occurs, the performance of the Company's obligations under this Section shall be secured by amounts deposited or to be deposited in trust pursuant to certain trust agreements to which the Corporation shall be a party, which amounts deposited shall in the aggregate be not less than $250,000, providing that the fees and expenses of counsel selected from time to time by the Key Employee pursuant to Subsection a. of this Section shall be paid, or reimbursed to the Key Employee if paid by the Key Employee, either in accordance with the terms of such trust agreements, or, if not so provided, on a regular, periodic basis upon presentation by the Key Employee to the trustee of a statement or statements prepared by such counsel in accordance with its customary practices. Any failure by the Company to satisfy any of its obligations under this Subsection shall not limit the rights of the Key Employee hereunder. Subject to the foregoing, the Key Employee shall have the status of a general unsecured creditor of the 12 12 Company and shall have no right to, or security interest in, any assets of the Company or any Subsidiary. 13. EMPLOYMENT RIGHTS. Nothing expressed or implied in the Plan shall create any right or duty on the part of the Company or the Key Employee to have the Key Employee remain in the employment of the Company at any time prior to a Change in Control. Any termination of employment of the Key Employee or the removal of the Key Employee from the office or position in the Company prior to a Change in Control but following the commencement of any discussion with any third person that ultimately results in a Change in Control shall be deemed to be a termination or removal of the Key Employee after a Change in Control for purposes of the Plan. 14. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable under the Plan all federal, state, city or other taxes as shall be required pursuant to any law or government regulation or ruling. 15. SUCCESSORS AND BINDING EFFECT. a. The Company shall require any successor, (including without limitation any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise, and such successor shall thereafter be deemed the Company for the purposes of the Plan), to assume and agree to perform the obligations under the Plan in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. The Plan shall be binding upon and inure to the benefit of the Company and any successor to the Company, but shall not otherwise be assignable, transferable or delegable by the Company. b. The rights under the Plan shall inure to the benefit of and be enforceable by the Key Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees and/or legatees. c. The rights under the Plan are personal in nature and neither the Company nor any Key Employee shall, without the consent of the other, assign, transfer or delegate the Plan or any rights or obligations hereunder except as expressly provided in this Section. Without limiting the generality of the foregoing, a Key Employee's right to receive payments hereunder shall not be assignable, transferable or delegable, whether by pledge, creation of a security interest or otherwise, other than by a transfer by his or her will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer 13 13 contrary to this Section, the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated. d. The obligation of the Company to make payments and/or provide benefits hereunder shall represent an unsecured obligation of the Company. e. The Corporation and each Key Employee recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained herein and, in the event of any such breach, the Corporation and each Key Employee hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus or other appropriate remedy to enforce performance of obligations under the Plan. 16. GOVERNING LAW. The validity, interpretation, construction and performance of the Plan shall be governed by the laws of the State of Ohio, without giving effect to the principals of conflict of laws of such State. 17. VALIDITY. If any provisions of the Plan or the application of any provision hereof to any person or circumstance is held invalid, unenforceable or otherwise illegal, the remainder of the Plan and the application of such provision to any other person or circumstances shall not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to the extent) necessary to make it enforceable, valid and legal. 18. CAPTIONS. The captions in the Plan are for convenience of reference only and do not define, limit or describe the scope or intent of the Plan or any part hereof and shall not be considered in any construction hereof. 19. CONSTRUCTION. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender and the singular shall be deemed to include the plural, unless the context clearly indicates to the contrary. 20. ADMINISTRATION OF THE PLAN. a. IN GENERAL. The Plan shall be administered by the Corporation, which shall be named fiduciary under the Plan. The Corporation shall have the sole and absolute discretion to interpret where necessary all provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities, in the language of the Plan), to determine the rights and status under the Plan of Key Employees or other persons, to resolve questions or disputes arising under the 14 14 Plan and to make any determinations with respect to the benefits payable hereunder and the persons entitled thereto as may be necessary for the purposes of the Plan. Without limiting the generality of the forgoing, the Corporation is hereby granted the authority (i) to determine whether a particular employee is a "Key Employee" under the Plan and (ii) to determine whether a particular Key Employee is eligible for Severance Compensation and other benefits under the Plan. b. DELEGATION OF DUTIES. The Corporation may delegate any of its administrative duties, including, without limitation, duties with respect to the processing, review, investigation, approval and payment of Severance Compensation and Additional Payments, to named administrator or administrators. c. REGULATIONS. The Corporation shall promulgate any rules and regulations it deems necessary in order to carry out the purposes of the Plan or to interpret the terms and conditions of the Plan; provided, however, that no rule, regulation or interpretation shall be contrary to the provisions of the Plan. d. CLAIMS PROCEDURE. The Corporation shall determine the rights of any employee of the Company to any Severance Compensation or an Additional Payment hereunder. Any employee or former employee of the Company who believes that he is entitled to receive Severance Compensation or an Additional Payment under the Plan, including other than that initially determined by the Corporation, may file a claim in writing with the Manager of Human Resources of the Corporation. The Corporation shall, no later than ninety (90) days after the receipt of a claim, either allow or deny the claim by written notice to the claimant. If a claimant does not receive written notice of the Corporation's decision on his claim within such 90-day period, the claim shall be deemed to have been denied in full. A denial of a claim by the Company, wholly or partially, shall be written in a manner calculated to be understood by the claimant and shall include: (i) the specific reason or reasons for the denial; (ii) specific reference to pertinent Plan provisions on which the denial is based; 15 15 (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the claim review procedure. A claimant whose claim is denied (or his duly authorized representative) may, within thirty (30) days after receipt of denial of his claim, request a review of such denial by the Corporation by filing with the Secretary of the Corporation a written request for review of his claim. If the claimant does not file a request for review with the Corporation within such 30-day period, the claimant shall be deemed to have acquiesced in the original decision of the Corporation on his claim. If a written request for review is so filed within such 30-day period, the Corporation shall conduct a full and fair review of such claim. During such full review, the claimant shall be given the opportunity to review documents that are pertinent to his claim and to submit issues and comments in writing. The Corporation shall notify the claimant of its decision on review with sixty (60) days after receipt of a request for review. Notice of the decision on review shall be in writing. If the decision on review is not furnished to the claimant within such 60-day period, the claim shall be deemed to have been denied on review. e. REVOCABILITY OF ACTION. Any action taken by the Corporation with respect to the rights or benefits under the Plan of any employee shall be revocable by the Corporation as to payments or distributions not yet made to such person, and acceptance of Severance Compensation or an Additional Payment under the Plan constitutes acceptance of and agreement to the Corporation making any appropriate adjustments in future payments or distributions to such person to offset any excess or underpayment previously made to him. f. EXCEPTION OF RECEIPT. Upon receipt of any Severance Compensation or an Additional Payment hereunder, the Corporation reserves the right to require any Key Employee to execute a receipt evidencing the amount and payment of such Severance Compensation and/or Additional Payment. 16 16 IN WITNESS WHEREOF, Belden & Blake Corporation has caused the Plan to be executed this 25 day of October, 1996. ATTEST: BELDEN & BLAKE CORPORATION /s/ Joseph M. Vitale By: /s/ M. L. Mardick - -------------------- ----------------------------- Title: President -------------------------- EX-11 7 EXHIBIT 11 1 EXHIBIT 11.1 - ------------------------------------------------------------------------------- BELDEN & BLAKE CORPORATION COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES (in thousands, except per share data)
Three months Nine months ended September 30, ended September 30, --------------------------------- ---------------------------- 1996 1995 1996 1995 ---------------- -------------- ------------ ------------- Average shares outstanding ............................. 11,171 9,741 11,168 7,993 Net effect of conversion of stock options and warrants ................................................ -- -- -- -- Total primary shares .................................... 11,171 9,741 11,168 7,993 Net effect of convertible securities..................... -- -- -- -- Total fully diluted shares .............................. 11,171 9,741 11,168 7,993 Net income .............................................. $ 3,186 $ 1,155 $ 10,013 $ 2,810 Less preferred stock dividends .......................... 45 45 135 135 Net income applicable to common shares primary ............................................... 3,141 1,110 9,878 2,675 Plus 7.5% preferred stock dividends ..................... -- -- -- -- Net income applicable to common shares ................. 3,141 1,110 9,878 2,675 fully diluted Earnings per common share primary ....................... .28 .11 .88 .33 Earnings per common share fully diluted ................. .28 .11 .88 .33
The effects of common stock options, warrants and convertible securities have not been included in the computation as their effect is either not dilutive or antidilutive. EX-27 8 EXHIBIT 27
5 0000880114 BELDEN & BLAKE CORPORATION 1,000 U.S. DOLLARS 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1 11,293 0 28,534 0 9,575 53,343 311,766 79,526 296,400 32,929 99,566 1,117 0 2,400 149,346 296,400 107,472 110,026 58,788 58,788 30,168 0 5,587 15,483 5,031 10,452 (439) 0 0 10,013 0.88 0.88
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