FORM OF SEVERANCE AGREEMENT

AMENDMENT TO SEVERANCE AGREEMENT

 

 

 

 

 

FORM OF EXECUTIVE SEVERANCE AGREEMENT
 
 
 
                          EXECUTIVE SEVERANCE AGREEMENT
 
     This agreement (this "Agreement") is made as of the __ day of ______, ____,
between  Southwestern Energy Company, an Arkansas corporation with its principal
offices at 1083 Sain Street,  P.O. Box 1408,  Fayetteville,  Arkansas 72702-1408
(hereinafter called the "Company"), and _______________  (hereinafter called the
"Employee"), residing at ____ ____________, ______________________.
 
WITNESSETH THAT:
 
          WHEREAS, should the Company or shareholders of the Company receive any
proposal from a third person concerning a possible business combination with the
Company or an  acquisition  of equity  securities  of the Company,  the Board of
Directors of the Company (hereinafter called the "Board") believes it imperative
that the Company and the Board be able to rely upon the  Employee to continue in
his  position,  and that the  Company  and the Board be able to receive and rely
upon his advice, if they request it, as to the best interests of the Company and
its shareholders, without concern that he might be distracted or that his advice
might be  affected by the  personal  uncertainties  and risks  created by such a
proposal;
 
          WHEREAS,  the Company desires to provide the compensation and benefits
provided  for  herein in order to  enable it to  attract  and  retain  qualified
executives such as the Employee, without a current expense to the Company;
 
          NOW, THEREFORE,  to assure the Company that it will have the continued
dedication  of the  Employee  and the  availability  of his advice  and  counsel
notwithstanding  the  possibility,  threat or  occurrence  of a bid to take over
control of the Company and to induce the Employee to remain in the employ of the
Company,  and for other good and  valuable  consideration,  the  Company and the
Employee hereby agree as follows:
                                       1
 
<PAGE>
 
                  1.       Definitions.
 
                           (i)      "Cause",  when  used in  connection with the
termination  of the  Employee's  employment  by the Company,  shall mean (a) the
willful  and  continued  failure by the  Employee  substantially  to perform his
duties and  obligations  to the Company  (other than any such failure  resulting
from his Disability)  which failure continues after the Company has given notice
thereof  to the  Employee  or (b)  the  willful  engaging  by  the  Employee  in
misconduct  which is materially  injurious to the Company.  For purposes of this
definition,  no act,  or  failure  to  act,  on the  Employee's  part  shall  be
considered  "willful" unless done, or omitted to be done, by the Employee in bad
faith and without  reasonable belief that his action or omission was in the best
interests of the Company.
 
                           (ii)     "Change   in   Control"    shall   mean  the
occurrence of any of the following:
 
                           (a)      any  "person"  (as  such  term  is  used  in
Sections  13(d) and 14(d) of the Securities  Exchange Act of 1934 (the "Exchange
Act"), an "Acquiring  Person")  becomes the "beneficial  owner" (as such term is
defined  in  Rule  13d-3  promulgated  under  the  Exchange  Act),  directly  or
indirectly,  of  securities  of the  Company  representing  20% or  more  of the
combined voting power of the Company's then  outstanding  securities,  provided,
however, that any acquisition by (x) the Company or any of its subsidiaries,  or
any employee  benefit plan (or related  trust)  sponsored or  maintained  by the
Company or any of its subsidiaries or (y) any corporation with respect to which,
immediately following such acquisition, more than 60% of, respectively, the then
outstanding  shares of common stock of such  corporation and the combined voting
power of the then outstanding voting securities of such corporation  entitled to
vote generally in the election of directors is then beneficially owned, directly
or 
 
                                       2
<PAGE>
 
indirectly,  in the aggregate by all or substantially  all of the individuals
and entities who were the beneficial  owners,  respectively,  of the outstanding
Company common stock and Company  voting  securities  immediately  prior to such
acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition,  of the outstanding  Company common stock and Company
voting securities, as the case may be, shall not constitute a Change in Control;
 
                           (b)      consummation    by   the    Company   of   a
reorganization,  merger or  consolidation  (a "Business  Combination"),  in each
case,  with respect to which all or  substantially  all of the  individuals  and
entities who were the respective  beneficial  owners of the outstanding  Company
common stock and Company voting  securities  immediately  prior to such Business
Combination  do  not in  the  aggregate,  immediately  following  such  Business
Combination,  beneficially  own,  directly  or  indirectly,  more  than  60% of,
respectively,  the then  outstanding  shares  of common  stock and the  combined
voting  power  of the  then  outstanding  voting  securities  entitled  to  vote
generally in the election of directors,  as the case may be, of the  corporation
resulting from such Business Combination in substantially the same proportion as
their  ownership   immediately  prior  to  such  Business   Combination  of  the
outstanding Company common stock and Company voting securities,  as the case may
be;
 
                           (c)      any  individual  who  is  nominated  by  the
Board for  election to the  Board on any date fails to be so elected as a direct
or indirect result of any proxy fight or contested election for positions on the
Board;
 
                           (d)      a "change in  control"  of the  Company of a
 nature  that would be  required  to be  reported  in  response  to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act occurs;
 
                                       3
<PAGE>
 
                           (e)      (i) a complete  liquidation  or  dissolution
of the Company or (ii) a sale or other  disposition of all  or substantially all
of the assets of both the  Exploration  and Production and the Utility  business
segments  of the  Company  other than to a  corporation  with  respect to which,
immediately following such sale or disposition,  more than 80% of, respectively,
the then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors is then beneficially owned,  directly or indirectly,  in the aggregate
by all or  substantially  all of the  individuals  and  entities  who  were  the
beneficial  owners,  respectively,  of the outstanding  Company common stock and
Company  voting  securities  immediately  prior to such sale or  disposition  in
substantially the same proportion as their ownership of the outstanding  Company
common  stock and Company  voting  securities,  as the case may be,  immediately
prior to such sale or disposition;
 
                           [(f) <F1> the sale or  other  disposition  of  all or
substantially  all the assets of the [Utility  business  segment<F2>/Exploration
and Production business segment<F3>] other than to a corporation with respect to
which,  immediately  following  such  sale or  disposition,  more  than  80% of,
respectively,  the then  outstanding  shares  of common  stock and the  combined
voting  power  of the  then  outstanding  voting  securities  entitled  to  vote
generally in the election of directors is then beneficially  owned,  directly or
indirectly,  in the aggregate by all or substantially all of the individuals and
entities  who were  the  beneficial  owners,  respectively,  of the  outstanding
Company common stock and Company  voting  securities  immediately  prior to such
sale or disposition in  substantially  the same proportion as their ownership of
the
 
                                       4
<PAGE>
 
outstanding  Company common  stock and Company  voting  securities,  as the case
may be,  immediately prior to such sale or disposition]; or
 
                           (g)      a majority  of the Board  determines  in its
sole and  absolute  discretion  that  there  has been a Change in Control of the
Company  or that  there  will be a Change in  Control  of the  Company  upon the
occurrence of certain specified events and such events occur.
 
                    Notwithstanding the foregoing, a Change in Control shall not
occur with respect to the Employee by reason of any event which would  otherwise
constitute  a Change in Control if,  immediately  after the  occurrence  of such
event,  individuals  including such Employee who were executive  officers of the
Company  immediately  prior to the  occurrence of such event,  own,  directly or
indirectly,  on a fully diluted basis,  (i) 15% or more of the then  outstanding
shares  of  common  stock  of  the  Company  or any  acquiror  or  successor  to
substantially  all of the  business of the Company  [or, in the case of an event
described  in Section  1(ii)(f)  relating to a sale of a business  segment,  the
entity acquiring the  business  segment]<F4> or (ii) 15% or more of the combined
voting power of the then  outstanding  voting  securities  of the Company or any
acquiror or successor to  substantially  all of the business of the Company [or,
in the case of an event  described in Section  1(ii)(f)  relating to a sale of a
business  segment,  the entity acquiring the business  segment]<F4>  entitled to
vote generally in the election of directors.
 
                    (iii)   "Committee" shall mean the Compensation Committee of
the Board.
 
                    (iv)     "Compensation"  shall  mean  the sum of the highest
annual  base  salary  of the  Employee  in effect  at any time  during  the year
preceding the Termination Date and the maximum
 
                                       5
<PAGE>
 
cash bonus  opportunity  available to the Employee under the Company's Incentive
Compensation Plan(s) at any time during the year prior to the Termination Date.
 
                  (v)  "Contract Period"   shall  mean  the  period  defined  in
Section 2 hereof.
 
                  (vi)  "Disability"  shall mean a physical or mental incapacity
of the Employee  which  entitles the  Employee to  compensation  and benefits at
least  equal  to  two-thirds  of his  base  salary  during  the  period  of such
incapacity  under any long term disability plan applicable to him and maintained
by the Company as in effect immediately prior to a Change in Control.
 
                  (vii) "Good Reason," when used with reference to a termination
by the Employee of his employment with the Company, shall mean:
 
                  (a) the assignment to the Employee of any duties  inconsistent
         with,  or the  reduction of powers or functions  associated  with,  his
         positions,  duties,   responsibilities  and  status  with  the  Company
         immediately  prior  to a  Change  in  Control,  or any  removal  of the
         Employee from, or any failure to reelect the Employee to, any positions
         or offices the Employee held immediately  prior to a Change in Control,
         except in connection with the termination of the Employee's  employment
         by the  Company for Cause or on account of  Disability  pursuant to the
         requirements of this Agreement;
 
                  (b) a reduction by the Company of the  Employee's  base salary
         as in  effect  immediately  prior to a Change  in  Control,  except  in
         connection  with the  termination of the  Employee's  employment by the
         Company  for  Cause  or  on  account  of  Disability  pursuant  to  the
         requirements of this Agreement;
 
                  (c) a change in the  Employee's  principal  work location to a
         location more than forty (40) miles from the Employee's  principal work
         location immediately prior to a change
 
                                       6
<PAGE>
 
         in control,  except for required travel on the Company's business to an
         extent  substantially  consistent with the  Employee's  business travel
         obligations immediately prior to a Change in Control;
 
                  (d) (1) the  failure by the  Company to continue in effect any
         employee  benefit  plan,  program  or  arrangement  (including  without
         limitation, "employee benefit plans" within the meaning of Section 3(3)
         of the  Employee  Retirement  Income  Security  Act  of  1974  and  any
         incentive   or   equity-based   plans)  in  which  the   Employee   was
         participating  immediately  prior to a Change in Control (or substitute
         plans,   programs  or   arrangements   providing   the  Employee   with
         substantially similar compensation and benefits), (2) the taking of any
         action,  or the failure to take any action,  by the Company which could
         (A) adversely  affect the  Employee's  participation  in, or materially
         reduce the Employee's  benefits under,  any of such plans,  programs or
         arrangements,  (B) materially  adversely affect the basis for computing
         benefits  under any of such  plans,  programs  or  arrangements  or (C)
         deprive the  Employee of any  material  fringe  benefit  enjoyed by the
         Employee immediately prior to a Change in Control or (3) the failure by
         the Company to provide the  Employee  with the number of paid  vacation
         days to which the Employee was entitled  immediately  prior to a Change
         in Control in accordance with the Company's  vacation policy applicable
         to the Employee then in effect, except in each case, in connection with
         the  termination of the Employee's  employment by the Company for Cause
         or on  account  of  Disability  pursuant  to the  requirements  of this
         Agreement;
 
                  (e) the failure by the Company to pay the Employee any portion
         of  the  Employee's  current  compensation,   or  any  portion  of  the
         Employee's   compensation   deferred 
 
                                       7
<PAGE>
 
         under any plan, agreement or arrangement of or with the Company, within
         seven (7) days of the date such compensation is due;
 
                  (f) a material  increase in the required  working hours of the
         Employee from that required prior to a Change in Control;
 
                  (g) the failure by the Company to obtain an  assumption of the
         obligations of the Company under this Agreement by any successor to the
         Company pursuant to Section 8(i) hereof; or
 
                  (h)  any  termination  of  the  Employee's  employment  by the
         Company  during the Contract  Period which is not effected  pursuant to
         the requirements of this Agreement.
 
                  (viii)  "Termination  Date" shall mean the  effective  date as
provided hereunder of the termination of the Employee's employment.
 
                  2.  Application of Agreement.  This Agreement shall apply only
to a termination  of employment of the Employee  during a period (the  "Contract
Period")  commencing on the date  immediately  preceding the date of a Change in
Control and  terminating  on the third  anniversary of the date of the Change in
Control; provided, however, that such Change in Control occurs during the period
commencing as of the date hereof and terminating on the first anniversary of the
date hereof or as further extended  pursuant to the following  sentence.  On the
first anniversary of the date hereof, and on each anniversary of the date hereof
thereafter,   the  period  during  which  this   Agreement   shall  apply  shall
automatically  be extended for one additional  year,  unless at least six months
before such  anniversary the Company notifies the Employee that it elects not to
extend such period.  If the Company elects not to extend such period,  then such
period  shall end two years after the next  anniversary  of the date hereof that
follows the date of such notice.  Notwithstanding  anything in this 
 
                                       8
<PAGE>
 
Agreement to the  contrary,  if,  within six months prior to the date on which a
Change  in  Control  occurs,  the  Employee's  employment  with the  Company  is
terminated  by the  Company  other  than  by  reason  of the  Employee's  death,
Disability  or  circumstances  that  would  constitute  Cause or the  terms  and
conditions of the Employee's  employment are adversely changed in a manner which
would  constitute  grounds for a  termination  of employment by the Employee for
Good  Reason,  and  it is  reasonably  demonstrated  that  such  termination  of
employment  or adverse  change (i) was at the  request of a third  party who has
taken  steps  reasonably  calculated  to effect  the  Change in  Control of (ii)
otherwise  arose in connection with or in anticipation of the Change in Control,
then for all purposes of this Agreement such  termination of employment shall be
deemed to have  occurred  during the  Contract  Period  and shall be  considered
either termination of the Employee's  employment without Cause by the Company or
termination of the Employee's employment by the Employee for Good Reason, as the
case may be. Any reference herein to the Employee's employment or termination of
employment  by or with the Company shall  include the  Employee's  employment or
termination of employment by or with any subsidiary or affiliated company of the
Company.
                  3.  Termination  of  Employment of the Employee By the Company
During the Contract Period.
 
                  (i) During the  Contract  Period,  the Company  shall have the
right to terminate the Employee's employment hereunder for Cause, for Disability
or without Cause by following the procedures hereinafter specified.
 
                  (ii)  Termination of the Employee's  employment for Disability
shall  become  effective  thirty (30) days after a notice of intent to terminate
the  Employee's  employment,   specifying  Disability  as  the  basis  for  such
termination, is given to the Employee by the Committee.
 
                                       9
<PAGE>
 
                  (iii) The Employee may not be terminated  for Cause unless and
until a notice of intent to  terminate  the  Employee's  employment  for  Cause,
specifying the particulars of the conduct of the Employee  forming the basis for
such termination, is given to the Employee by the Committee and, subsequently, a
majority of the Board finds,  after reasonable notice to the Employee (but in no
event less than  fifteen  (15) days' prior  notice) and an  opportunity  for the
Employee  and his  counsel to be heard by the  Board,  that  termination  of the
Employee's  employment  for Cause is justified.  Termination  of the  Employee's
employment for Cause shall become  effective after such finding has been made by
the Board and five (5)  business  days  after  the Board  gives to the  Employee
notice  thereof,  specifying  in detail the  particulars  of the  conduct of the
Employee found by the Board to justify such termination for Cause.
 
                  (iv) The Company  shall have the  absolute  right to terminate
the Employee's  employment  without Cause at any time during the Contract Period
by vote of a majority of the Board.  Termination  of the  Employee's  employment
without Cause shall be effective five (5) business days after the Board gives to
the Employee notice thereof, specifying that such termination is without Cause.
 
                  (v) Upon a termination of the Employee's  employment for Cause
during the  Contract  Period,  the  Employee  shall have no right to receive any
compensation or benefits  hereunder (other than those  compensation and benefits
provided in Paragraph (i) (a) of Section 5 hereof).  Upon a  termination  of the
Employee's  employment  without  Cause or for  Disability  during  the  Contract
Period,  the Employee shall be entitled to receive the compensation and benefits
provided in Section 5 hereof.  Except as  provided in Section 2, this  Agreement
shall  not  apply  to,  and the  Employee  shall  have no right to  receive  any
compensation  or benefits  hereunder in connection  with any  termination of the
Employee's employment by the Company other than during the Contract Period.
 
                                       10
<PAGE>
 
                  4.  Termination  of  Employment  By the  Employee  During  the
Contract Period.  During the Contract Period,  the Employee shall be entitled to
terminate  his  employment  with  the  Company,  and  shall be  entitled  to the
compensation and benefits hereunder as follows:
 
                  (i) If the Employee terminates his employment with the Company
during the  twelve-month  period beginning  immediately  preceding the date of a
Change in Control other than for Good Reason,  the Employee  shall have no right
to receive any compensation or benefits  hereunder (other than those provided in
Paragraph (i) (a) of Section 5 hereof).
 
                  (ii) If the Employee shall  terminate his employment  with the
Company at any time during the  Contract  Period for Good  Reason,  the Employee
shall be entitled to receive the benefits provided in Section 5 hereof.
 
                  (iii) The Employee  shall give the Company notice of voluntary
termination of employment  pursuant to this Section 4, which notice need specify
only the Employee's  desire to terminate his employment and, if such termination
is for Good Reason,  set forth in reasonable  detail the facts and circumstances
claimed by the Employee to constitute Good Reason. Termination of the Employee's
employment  by the Employee  pursuant to this Section 4 shall be effective  five
(5) business days after the Employee gives notice thereof to the Company. Except
as provided in Section 2, this  Agreement  shall not apply to, and the  Employee
shall have no right to  receive,  any  compensation  or  benefits  hereunder  in
connection  with any  termination of the  Employee's  employment by the Employee
other than during the Contract  Period.  This Agreement  shall not apply to, and
the  Employee  shall have no right to  receive,  any  compensation  or  benefits
hereunder in  connection  with a  termination  of the  Employee's  employment on
account of the Employee's death, whether or not during the Contract Period.
 
                                       11
<PAGE>
 
                  5.  Compensation  and  Benefits  Upon  Termination  in Certain
Circumstances. (i) Upon the termination of the employment of the Employee by the
Company pursuant to Section 3(iv)  (termination  without Cause) hereto or by the
Employee as described in Section 4(ii) hereof, the Employee shall be entitled to
receive  the  compensation  and  benefits in  Subparagraphs  (a) and (b) of this
Paragraph  (i). Upon the  termination  of the  employment of the Employee by the
Company  pursuant to Section  3(ii)  (termination  by reason of  Disability)  or
Section 3(iii)  (termination  for Cause) or by the Employee  pursuant to Section
4(i),  the  Employee  shall be  entitled  to the  compensation  and  benefits in
Subparagraph (a) of this Paragraph (i).
 
                  (a) The Company shall pay to the Employee,  not later than the
         Termination  Date,  a lump sum cash amount  equal to the sum of (I) the
         full base salary earned by the Employee  through the  Termination  Date
         and unpaid at the Termination  Date,  calculated at the highest rate of
         base salary in effect at any time during the twelve months  immediately
         preceding  the  Termination  Date,  (II) the amount of any base  salary
         attributable  to vacation  earned by the  Employee but not taken before
         the  Termination  Date,  (III)  any  annualized  bonus  accrued  to the
         Employee  through the  Termination  Date and unpaid at the  Termination
         Date,  plus (IV) all other amounts earned by the Employee and unpaid at
         the Termination Date.
 
                  (b) The Company shall pay to the Employee,  not later than the
         Termination  Date,  a lump sum cash amount  equal to the product of the
         Employee's Compensation times [2.99/2.00]<F5>.
 
                                       12
<PAGE>
 
                  (ii) If the Employee's employment is terminated by the Company
pursuant  to  Section  3(ii)  (termination  by  reason of  Disability)  or 3(iv)
(termination without Cause) hereof, or by the Employee pursuant to Section 4(ii)
hereof, the Employee shall be entitled to receive the following compensation and
benefits:
 
                  (a) The  Company  shall  maintain in full force and effect for
         the   Employee's   continued   benefit  all  life,   medical,   dental,
         prescription drug and long- and short-term  disability plans,  programs
         or arrangements, whether group or individual, in which the Employee was
         entitled to participate  at any time during the twelve 12  month-period
         prior to the Termination Date, until the earliest to occur of (I) three
         years after the Termination  Date; (II) the Employee's  death (provided
         that compensation and benefits payable to his  beneficiaries  shall not
         terminate  upon his  death);  or (III) with  respect to any  particular
         plan,  program or  arrangement,  the date he is  afforded a  comparable
         benefit at a comparable cost to the Employee by a subsequent  employer.
         In the  event  that the  Employee's  participation  in any  such  plan,
         program or  arrangement  of the Company is prohibited the Company shall
         arrange  to  provide  the  Employee  with   compensation  and  benefits
         substantially  similar  to those  which the  Employee  is  entitled  to
         receive under such plan, program or arrangement for such period.
 
                  (b) The Company  shall pay to the  Employee all legal fees and
         expenses (including legal fees and expenses incurred in connection with
         an  arbitration  proceeding  engaged in  pursuant to Section 10 hereof)
         incurred by the Employee as a result of such  termination of employment
         (including all such fees and expenses,  if any,  incurred in contesting
         or disputing  any such  termination  or in seeking to obtain or enforce
         any right or benefit  provided  to the  Employee by this  Agreement  or
         under  any  other  plan,  program  or 
 
                                       13
<PAGE>
 
         arrangement of the Company or agreement with the Company),  as and when
         such fees and expenses become due.
 
                  (iii) The  Employee  shall not be  required  to  mitigate  the
amount of any payment or benefit provided for in this Section 5 by seeking other
employment or otherwise.
 
                  (iv) The amount of any payment or benefit provided for in this
Section 5 shall not be reduced by any  compensation,  benefits or other  amounts
paid to or earned by the  Employee  as the  result of  employment  with  another
employer  after  the  Termination  Date or  otherwise,  except  as  specifically
provided in Section 5(ii)(a)(III).
 
                  (v) In the event that any payment hereunder, together with any
other payment or the value of any benefit  received in connection  with a Change
in Control or the  termination  or the  Employee's  employment  pursuant to this
Agreement or any plan,  agreement or other  arrangement  between the Company and
the Employee (or any member of Company's  affiliated group ("Affiliated  Group")
as such term is defined in Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code"),  without regard to Section  1504(b)  thereof)  ("Change in
Control  Payments")  would  result in the  imposition  of an excise tax ("Excise
Tax") under Section 4999 of the Code, the payment hereunder may, at the election
of the Employee, be reduced by the amount necessary to prevent the imposition of
such excise tax (the "Payment Reduction").
 
                  (a)  All  determinations   required  to  be  made  under  this
         Paragraph  (v),  including  whether a Payment  Reduction is required to
         avoid the taxes described in the preceding paragraph, the amount of any
         such Payment  Reduction,  and the assumptions to be used in determining
         such  conclusions,  shall  be made by the  Company's  certified  public
         accountants (the "Accountants") which shall provide detailed supporting
         calculations  both to the Company and the Employee  within fifteen days
         of the  Termination  Date, if applicable.  All
 
                                       14
<PAGE>
 
         fees and  expenses  of the  Accountants  shall be borne  solely  by the
         Company.  Within five (5) days after receipt of such supporting detail,
         the Employee may, by filing a written notice with the Company,  elect a
         Payment Reduction. The Payment Reduction, if any, shall then be made by
         the Company within five days of the receipt of the Employee's election.
         If the  Accountants  determine  that no Excise  Tax is  payable  by the
         Employee,  it shall furnish the Employee with a written  representation
         that  failure to report the Excise Tax on  Employee's  applicable  U.S.
         Federal income tax return for the  applicable  year would not result in
         the imposition of a negligence or similar penalty. Any determination by
         the Accountants shall be binding on both the Employee and the Company.
 
                  (b) If it is determined that the Payment Reductions which were
         not made by the Company should have been made  ("Overpayment"),  or, if
         such  Payment  Reductions  which  were made  should  not have been made
         ("Underpayment"),  (I) the  Company  shall,  in the  case  of any  such
         Underpayment,  make a further  payment to Employee,  within thirty days
         notice  of such  Underpayment,  in the  amount  of  such  Underpayment,
         including interest accrued with respect thereto, provided however, such
         further  payment  shall not include any such  amounts  (including  such
         interest) that would result,  either alone, or in combination  with any
         Change in Control Payment in any Excise Tax after giving effect to such
         payment by the Company to the Employee on account of such Underpayment,
         or (II) in the  case of an  Overpayment,  then  Employee  shall  pay an
         amount equal to such  Overpayment,  including any interest accrued with
         respect thereto,  such that the net effect,  after such payment of such
         Overpayment  (including interest) from Employee to the Company would be
         that no Excise Tax would be imposed on the  Employee.  For  purposes of
         this Paragraph (v), the Accountants  shall determine the amount of such
         Overpayment or Underpayment.
 
                                       15
<PAGE>
 
                  (vi) In the event that any payment  hereunder,  together  with
any other  payment or the value of any  benefit  received in  connection  with a
Change in Control or the  termination or the Employee's  employment  pursuant to
this Agreement or any plan,  agreement or other arrangement  between the Company
and the  Employee  (or any member of the  Affiliated  Group) would result in the
imposition of an excise tax ("Excise  Tax") under Section 4999 of the Code,  and
the Employee does not elect a Payment Reduction,  as described in Paragraph 5(v)
above, the Company shall pay to the Employee an additional  payment (a "Gross-Up
Payment")  in an amount  such that after  payment by the  Employee  of all taxes
(including interest and penalties imposed with respect to such taxes), including
without  limitation,  any income taxes,  employment taxes and Excise Tax imposed
upon the  Gross-Up  Payment,  the  Employee  retains  an amount of the  Gross-Up
payment equal to the Excise Tax imposed upon the payments made.
 
                  (a) Subject to the provisions of Paragraph (vi)(c) hereof, all
         determinations required to be made under this Paragraph (vi), including
         whether a Gross-Up Payment is required, the amount of any such Gross-Up
         Payment,   and  the   assumptions  to  be  used  in  determining   such
         conclusions,  shall be made by the  Company's  Accountants  which shall
         provide detailed  supporting  calculations  both to the Company and the
         Employee  within  fifteen days of the  Termination  Date.  All fees and
         expenses of the Accountants  shall be borne solely by the Company.  The
         Gross-Up Payment, if any, shall be made by the Company within five days
         of the receipt of the  Accountants'  determination.  If the Accountants
         determine  that no Excise  Tax is  payable  by the  Employee,  it shall
         furnish the  Employee  with a written  representation  that  failure to
         report the Excise Tax on Employee's  applicable U.S. Federal income tax
         return for the applicable  year would not result in the imposition of a
         negligence or similar penalty.
 
                                       16
<PAGE>
 
                  (b) If it is determined that a Gross-Up  Payment which was not
         made by the Company  should have been made  ("Gross-Up  Underpayment"),
         or, if such Gross-Up Payments which were made should not have been made
         ("Gross-Up  Overpayment"),  Employee  shall,  in the  case of any  such
         Gross-Up  Overpayment,  refund such Gross-Up Overpayment (together with
         any interest paid or credited thereon after taxes  applicable  thereto)
         promptly to the Company, or in the case of an Gross-Up Underpayment, in
         the event  that the  Company  exhausts  its  remedies  under  Paragraph
         (vi)(c)  hereof,  and the  Employee  is required  thereafter  to make a
         payment of any Excise  Tax,  any such  Gross-Up  Underpayment  shall be
         promptly paid by the Company to or for the benefit of the Employee. For
         purposes of this Paragraph  (vi), the  Accountants  shall determine the
         amount of such Overpayment or Underpayment.
 
                  (c) Employee  shall notify the Company in writing of any claim
         by the Internal Revenue Service that, if successful,  would require the
         payment of an Excise Tax. Such  notification  shall be given as soon as
         practicable  but no later than ten business  days after the Employee is
         informed in writing of such claim and shall  apprise the Company of the
         nature of such claim and the date on which such claim is  requested  to
         be paid.  Employee shall not pay any such claim prior to the expiration
         of a thirty day period  following the date on which the Employee  gives
         such notice to the Company (or such shorter  period  ending on the date
         that any  payment of taxes with  respect to such claim is due).  If the
         Company  notifies the Employee in writing  prior to the  expiration  of
         such period that it desires to contest such claim,  Employee  shall (I)
         give the Company any  information  reasonably  requested by the Company
         relating  to such  claim,  (II) take such  action  in  connection  with
         contesting  such claim as the  Company  shall  reasonably  request,  in
         writing from time to time,  including,
 
                                       17
<PAGE>
 
         without limitation, accepting legal representation with respect to such
         claim by an attorney reasonably selected by the Company, and acceptable
         to the  Employee  (which  such  acceptance  shall  not be  unreasonably
         withheld),  (III)  cooperate with the Company in good faith in order to
         effectively  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  additional  interest and  penalties)  incurred in
         connection  with such contest and shall indemnify and hold harmless the
         Employee, on an after-tax basis, for any income taxes, employment taxes
         and Excise Tax imposed,  including  interest and penalties imposed with
         respect thereto, imposed as a result of such representation and payment
         of costs and expenses.  Without limitation on the foregoing  provisions
         of this Paragraph  (vi)(c),  the Company shall control all  proceedings
         taken in  connection  with such  contest,  and may, at its sole option,
         pursue  or  forgo  any and  all  administrative  appeals,  proceedings,
         hearings  and  conferences  with the  applicable  taxing  authority  in
         respect of such claim and may, at its sole  option,  either  direct the
         Employee to pay the tax  claimed  and sue for a refund,  or contest the
         claim in a  permissible  manner,  and the Employee  agrees to prosecute
         such contest to a determination before any administrative tribunal, any
         court of initial  jurisdiction and in one or more appellate  courts, as
         the Company  shall  determine,  provided  however,  that if the Company
         directs  the  Employee  to pay such  claim  and sue for a  refund,  the
         Company shall advance the amount of such payment to the Employee, on an
         interest-free basis and shall indemnify and hold the Employee harmless,
         on an  after-tax  basis from any  income  taxes,  employment  taxes and
         Excise Tax  imposed,  including  interest  or  penalties  with  respect
         thereto,  imposed  with  respect to such advance or with respect to any
         imputed income with respect to such advance;  and further provided that
 
                                       18
<PAGE>
 
         any  extension  of the  statute of  limitations  relating to payment of
         taxes for the taxable year of the  Employee  with respect to which such
         contested  amount is claimed is due is limited solely by such contested
         amount.  Furthermore,  the  Company's  control of the contest  shall be
         limited to issues  with  respect to which a Gross-Up  Payment  would be
         payable  hereunder  and the  Employee  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.
 
                  (d)  If,  after  the  receipt  by the  Employee  of an  amount
         advanced by the Company  pursuant to  Paragraph  (vi)(c),  the Employee
         receives  a refund  with  respect to such  claim,  the  Employee  shall
         (subject to the Company's  complying with the requirements of Paragraph
         (vi)(c))  promptly  pay  to the  Company  the  amount  of  such  refund
         (together  with any  interest  paid or  credited  thereon  after  taxes
         applicable thereto). If, after the receipt by the Employee of an amount
         advanced by the Company pursuant to Paragraph  (vi)(c), a determination
         is made that the  Employee  shall not be  entitled  to any refund  with
         respect to such claim and the Company  does not notify the  Employee in
         writing  of its intent to contest  such  denial of refund  prior to the
         expiration of 30 days after such determination, then such advance shall
         be  forgiven  and shall not be  required to be repaid and the amount of
         such  advance  shall  offset,  to the  extent  thereof,  the  amount of
         Gross-Up Payment required to be paid.
 
                  6. Payment Obligations  Absolute.  The Company's obligation to
pay the  Employee  the amounts  provided  for  hereunder  shall be absolute  and
unconditional and shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim,  recoupment, defense or other right which
the  Company  may  have  against  him or  anyone  else  and,  including  without
limitation,  any  defense  or claim  based on a breach  by the  Employee  of the
covenants  contained herein.  All amounts payable by the Company hereunder shall
be paid without  notice or 
 
                                       19
<PAGE>
 
demand. Except as expressly provided herein, the Company waives all rights which
it may  now  have or may  hereafter  have  conferred  upon  it,  by  statute  or
otherwise, to amend, terminate,  cancel or rescind this Agreement in whole or in
part.  Subject to the right of the Company to seek arbitration  under Section 10
hereof and recover any  payment  made  hereunder,  each and every  payment  made
hereunder  by the  Company  shall be final,  and the  Company  shall not seek to
recover all or any part of such payment from the Employee or from whomsoever may
be entitled thereto, for any reason whatsoever.
 
                  7.       Covenant Not to Solicit.
 
                  (i) In the event the  Employee's  employment  is terminated by
the Company pursuant to Section 3(iv) hereof  (termination  without Cause) or by
the  Employee  pursuant  to Section 4 hereof,  the  Employee  agrees  during the
three-year period following the Termination Date not to:
 
                  (a) offer employment to any officer or employee of the Company
                  or any  subsidiary  or  affiliated  company of the  Company or
                  attempt to induce any such  officer or  employee  to leave the
                  employ of the Company or any subsidiary or affiliated  company
                  of the Company; or
 
                  (b) attempt to persuade or induce, or persuade or induce,  any
                  officer,  director, agent, customer, client or supplier of the
                  Company or any subsidiary or affiliated company of the Company
                  to discontinue his or her relationship with the Company or any
                  subsidiary or affiliated company of the Company.
 
                  (ii) In the event of any breach of the foregoing covenant, the
Employee  acknowledges  that the Company's  remedy at law is inadequate and that
the Company shall be entitled to seek injunctive relief.
 
                                       20
<PAGE>
 
                  8.       Successors; Binding Agreement.
 
                  (i)  This  Agreement  shall  be  binding  upon  any  successor
(whether direct or indirect, by purchase, merger, consolidation,  liquidation or
otherwise)  to all or  substantially  all of the business  and/or  assets of the
Company. Additionally, the Company shall require any such successor expressly to
agree to assume and to assume all of the  obligations  of the Company under this
Agreement  upon  or  prior  to  such  succession  taking  place.  A copy of such
assumption and agreement  shall be delivered to the Employee  promptly after its
execution  by the  successor.  Failure of the Company to obtain  such  agreement
prior  to the  effectiveness  of any  such  succession  shall  constitute  "Good
Reason."  As used  in this  Agreement,  "Company"  shall  mean  the  Company  as
hereinbefore  defined  and  any  successor  to its  business  and or  assets  as
aforesaid,  whether or not such  successor  executes and delivers the  agreement
provided for in this Section 8(i).
 
                  (ii)  This  Agreement  is  personal  to the  Employee  and the
Employee may not assign or transfer any part of his rights or duties  hereunder,
or any compensation due to him hereunder,  to any other person, except that this
Agreement  shall inure to the benefit of and be  enforceable  by the  Employee's
personal   or   legal   representatives,   executors,   administrators,   heirs,
distributees,  devises,  legatees or  beneficiaries.  No payment pursuant to any
will or the laws of descent and distribution  shall be made hereunder unless the
Company  shall have been  furnished  with a copy of such will  and/or such other
evidence  as the Board may deem  necessary  to  establish  the  validity  of the
payment.
 
                  9.  Modification;  Waiver. No provisions of this Agreement may
be modified, waived or discharged unless such waiver,  modification or discharge
is agreed to in a writing signed by the Employee and such director or officer as
may be specifically  designated by the Board.  Waiver by any party of any breach
of or failure to comply with any provision of this Agreement by
 
                                       21
<PAGE>
 
the other party shall not be construed as, or constitute, a continuing waiver of
such provision, or a waiver of any  other  breach of, or failure to comply with,
any other provision of this Agreement.
 
                  10.      Arbitration of Disputes.
 
                  (i) Any  disagreement,  dispute,  controversy or claim arising
out of or relating to this Agreement or the  interpretation  or validity  hereof
shall be settled exclusively and finally by arbitration except that in the event
of the  Employee's  breach of the covenant  contained  in Section 7 hereof,  the
Company shall be entitled to seek  injunctive  relief  pursuant to Section 7(ii)
hereof. It is specifically understood and agreed that any disagreement,  dispute
or controversy  which cannot be resolved between the parties,  including without
limitation any matter relating to the  interpretation of this Agreement,  may be
submitted to arbitration  irrespective of the magnitude  thereof,  the amount in
controversy or whether such disagreement, dispute or controversy otherwise would
be  considered  justiciable  or  ripe  for  resolution  by a court  or  arbitral
tribunal.
 
                  (ii) The arbitration shall be conducted in accordance with the
Commercial   Arbitration  Rules  (the  "Arbitration   Rules")  of  the  American
Arbitration Association (the "AAA").
 
                  (iii) The arbitral  tribunal shall consist of one  arbitrator.
The parties to the  arbitration  jointly shall directly  appoint such arbitrator
within 30 days of  initiation of the  arbitration.  If the parties shall fail to
appoint such arbitrator as provided above, such arbitrator shall be appointed by
the AAA as  provided  in the  Arbitration  Rules and  shall be a person  who (a)
maintains  his  principal  place  of  business  within  30  miles of the City of
Fayetteville,   Arkansas,  and  (b)  has  had  substantial  experience  (whether
practical  or  academic)  in mergers and  acquisitions  or, if no such person is
available,  in employee compensation and benefits.  The Company shall pay all of
the fees, if any, and expenses of such arbitrator.
 
                                       22
<PAGE>
 
                  (iv) The arbitration shall be conducted within 30 miles of the
City of  Fayetteville,  Arkansas  or in such other city in the United  States of
America as the parties to the dispute may designate by mutual written consent.
 
                  (v) At any oral  hearing of  evidence in  connection  with the
arbitration,  each party  thereto or its legal  counsel  shall have the right to
examine its witnesses and to cross-examine  the witnesses of any opposing party.
No evidence of any  witness  shall be  presented  unless the  opposing  party or
parties shall have the opportunity to cross-examine such witness,  except as the
parties to the dispute otherwise agree in writing or except under  extraordinary
circumstances where the interests of justice require a different procedure.
 
                  (vi) Any decision or award of the arbitral  tribunal  shall be
final and binding upon the parties to the  arbitration  proceeding.  The parties
hereto hereby waive, to the extent  permitted by law, any rights to appeal or to
seek review of such award by any court or  tribunal.  The parties  hereto  agree
that the arbitral award may be enforced  against the parties to the  arbitration
proceeding  or their assets  wherever they may be found and that a judgment upon
the arbitral award may be entered in any court having jurisdiction.
 
                  (vii)  Nothing  herein  contained  shall be deemed to give the
arbitral  tribunal  any  authority,  power,  or right to alter,  change,  amend,
modify, add to, or subtract from any of the provisions of this Agreement.
 
                  11.  Notice.   All  notices,   requests,   demands  and  other
communications  required or  permitted  to be given by either party to the other
party  by  this  Agreement  (including,   without  limitation,   any  notice  of
termination  of  employment  and any notice  under the  Arbitration  Rules of an
intention  to  arbitrate)  shall be in writing  and shall be deemed to have been
duly given when
 
                                       23
<PAGE>
 
delivered personally or received by certified or registered mail, return receipt
requested, postage prepaid, at the address of the other party, as follows:
 
                  If to the Company, to:
                  Southwestern Energy Company
 
                  1083 Sain Street
                  P.O. Box 1408
                  Fayetteville, Arkansas 72702-1408
                  Attention:  Board of Directors and Secretary
 
                  If to the Employee, to:
                  _________________
                  _________________
                  _________________
 
Either  party  hereto may  change its  address for  purposes of this  Section 11
by giving  fifteen  (15) days' prior notice to the other party hereto.
 
                  12.  Severability.  If any term or provision of this Agreement
or the application  thereof to any person or circumstance shall to any extent be
invalid or unenforceable,  the remainder of this Agreement or the application of
such term or provision to persons or circumstances  other than those as to which
it is held invalid or unenforceable shall not be affected thereby, and each term
and provision of this  Agreement  shall be valid and  enforceable to the fullest
extent permitted by law.
 
                  13. Headings.  The headings in this Agreement are inserted for
convenience  of  reference  only and shall not be a part of or control or affect
the meaning of this Agreement.
 
                  14.  Counterparts.  This  Agreement may be executed in several
counterparts, each of which shall be deemed an original.
 
                                       24
<PAGE>
 
                  15.  Governing  Law.  This  Agreement  has been  executed  and
delivered in the State of Arkansas and shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of Arkansas.
 
                  16. Payroll and  Withholding  Taxes.  The Company may withhold
from any amounts payable to the Employee  hereunder all federal,  state, city or
other  taxes that the  Company  may  reasonably  determine  are  required  to be
withheld pursuant to any applicable law or regulation,  provided  however,  that
the Company's  determinations  respecting  matters  described in Paragraph  5(v)
shall be based  upon and  shall be  consistent  with the  determinations  by the
Accountants.
 
                  17.  Entire  Agreement.  Except  as  explicitly  provided  for
herein,  this Agreement  supersedes any and all other oral or written agreements
heretofore  made relating to the subject matter hereof,  including the agreement
dated, ______,  between the Company and the Employee, and constitutes the entire
agreement of the parties relating to the subject matter hereof;  provided, that,
this  Agreement  shall not supersede or limit or in any way affect the amount of
compensation or benefits to which the Employee would be entitled under any other
agreement,  plan,  program or  arrangement  with the Company  including any such
agreement,  plan, program or arrangement providing for compensation and benefits
in the nature of severance pay.
 
                                       25
<PAGE>
 
                  IN WITNESS  WHEREOF,  the parties have executed this Agreement
as of the date first written above.
 
 
                                          Southwestern Energy Company
 
                                          By: ___________________________
 
                                          Chairman of the Compensation Committee
                                          Southwestern Energy Company
 
 
 
                                          By:___________________________
 
                                          Chairman of the Board of
                                          Southwestern Energy Company
 
 
 
                                          _______________________________
                                          Employee
 
 
 
                                       26
<PAGE>
 
 
 
 
- --------
<F1>     Subsection  (f)  applies  to Messrs.  Harold Korell,  Greg Kerley, Alan
         Stevens, Richard Lane and Charles Stevens.
 
<F2>     Applies to Mr. Charles Stevens
 
<F3>     Applies to Messrs. Harold Korell, Greg Kerley, Alan Stevens and Richard
         Lane.
 
<F4>     Applies to Messrs.  Harold Korell, Greg Kerley,  Alan Stevens,  Richard
         Lane and Charles Stevens.
 
<F5>     2.99  for   Messrs.  Harold  Korell,  Greg  Kerley,  Alan  Stevens  and
         Ms. Debbie Branch; 2.0 for Richard Lane and Charlie Stevens
 
 
 

 

AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT

 

This Amendment to Executive Severance Agreement (this “Amendment”), dated as of the ____ day of December, 2008, is entered into by and among Southwestern Energy Company, an Arkansas corporation (the “Company”), and ____________ (“Executive”). Each of the Company and Executive are referred to herein individually as a “Party” and collectively as the “Parties.” Capitalized terms not otherwise defined in this Amendment shall have the meaning set forth in the Severance Agreement (as defined below).

 

WHEREAS, the Company and the Executive entered into that certain Executive Severance Agreement effective as of _______________, _____ (the “Severance Agreement”); and

 

WHEREAS, the Company and the Executive desire to amend the Severance Agreement.

 

NOW, THEREFORE, in consideration of the premises and mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

a.

The Agreement shall be amended by adding the following new Section 18 to the end thereof, to be and read as follows:

 

“18.

Application of Section 409A of the Code.

(a)

General.  To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code, so as to prevent inclusion in gross income of any amounts payable or benefits provided hereunder in a taxable year that is prior to the taxable year or years in which such amounts or benefits would otherwise actually be distributed, provided or otherwise made available to the Executive.  This Agreement shall be construed, administered, and governed in a manner consistent with this intent and the following provisions of this paragraph shall control over any contrary provisions of this Agreement.  

(b)

Restrictions on Specified Executives.  If the Company determines that the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code and delayed payment of any amount or commencement of any benefit under this Agreement is required to avoid a prohibited distribution under Section 409A(a)(2) of the Code, then, to such extent as required, deferred compensation payable hereunder in connection with the Executive’s termination of employment will be delayed and paid, with interest at the short term applicable federal rate as in effect as of the termination date, in a single lump sum six months and one day thereafter (or if earlier, the date of the Executive’s death).  The Compensation Committee of the Board shall determine whether the Executive is a “specified employee” based on the procedures adopted by the Company in writing, which procedures shall comply with the applicable limitations under Section 409A of the Code, and the rules prescribed in Treasury Regulation §1.409A-1(i).

 

1

 

 


(c)

Separation from Service.  Amounts payable hereunder upon the Executive’s termination or severance of employment with the Company that constitute deferred compensation under Section 409A of the Code shall not be paid prior to the Executive’s “separation from service” within the meaning of Section 409A of the Code.

(d)

Installments.  For purposes of Section 409A of the Code, any right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments so that each payment is designated as a separate payment for purposes of Section 409A of the Code.

(e)

Reimbursements.  All reimbursements and in-kind benefits provided under this Agreement which constitute a payment of nonqualified deferred compensation under Section 409A of the Code, including any payments provided under Section 5 and, shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirements that:

(i)

any reimbursement is for expenses incurred during an extended period of time following termination of employment;

(ii)

the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;

(iii)

the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred; and

(iv)

the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.

(f)

References to Section 409A.  References in this Agreement to Section 409A of the Code include both that section of the Code itself and any guidance promulgated thereunder.

(g)

Application of Section 409A.  The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such section.”

This Agreement may be executed in two or more counterparts.

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.

SOUTHWESTERN ENERGY COMPANY

 

By:

Its:

 

 

 

3