EXHIBIT 10.5
CHANGE IN CONTROL EXECUTIVE SEVERANCE AGREEMENT
This Change in Control Executive Severance Agreement (this "Agreement"),
dated and effective May 5, 2005 (the ("Effective Date"), is by and between
Delta Petroleum Corporation, a Colorado corporation (the "Company"), and Xxxxx
X. Xxxxx (the "Executive").
STATEMENT OF PURPOSE
The Company desires, for its continued success, to have the benefit of
services of experienced management personnel like the Executive. The Board of
Directors of the Company (the "Board") therefore believes that it is in the
best interest of the Company and its shareholders that, in the event of a
prospective Change in Control of the Company, the Executive be reasonably
secure in his employment and position with the Company, so that the Executive
can exercise independent judgment as to the best interest of the Company and
its shareholders, without distraction by any personal uncertainties or risks
regarding the Executive's continued employment with the Company created by the
possibility of such a Change in Control. Therefore, the Company and the
Executive now desire to enter into this Agreement to assure severance benefits
to the Executive in connection with certain terminations of employment upon or
after a Change in Control of the Company.
AGREEMENT
In consideration of the statements made in the Statement of Purpose and
the mutual agreements set forth below, the Company and the Executive hereby
enter into this Agreement, as follows:
1. Definitions and Interpretation. Various terms used in this Agreement
are defined in Exhibit A; each of the defined terms used in this Agreement
begins with a capital letter. Various interpretative matters for this
Agreement are also set forth in Exhibit A which is an integral part of this
Agreement and incorporated herein by reference.
2. Term of Agreement. This Agreement will commence on the Effective
Date and shall continue in effect until December 31, 2006. At the end of such
period and, if extended at the end of each two-year period commencing January
1st thereafter, the term of this Agreement shall be extended for an additional
two (2) year period but only if the Board delivers written notice at least
sixty (60) days prior to the end of such term, or extended term, to Executive
that the Agreement will be extended for an additional 2-year period. In the
event that such notice is not provided, the Agreement will terminate at the
end of the term, or extended term, then in progress. However, in the event a
Change in Control occurs during the original or any extended term, this
Agreement will remain in effect for thirty-six (36) months beyond the end of
the month next following the month in which such Change in Control occurred.
Notwithstanding the foregoing, severance and other benefits shall be provided
under this Agreement only in the event of a Severance Payment Event (as
defined in Exhibit A). If there is not a Severance Payment Event, then any
severance or other post-termination benefits shall be provided under the terms
and conditions of the Employment Agreement (as defined in Exhibit A) to the
extent applicable.
3. Severance Benefits. Upon the occurrence of a Severance Payment Event,
in addition to any other severance or employment-termination compensation or
benefits to which the Executive may be entitled from the Company or any
Subsidiary under the terms of any Plan (other than a severance benefits plan
for employees generally) of which the Executive was a participant or a
beneficiary immediately before the Severance Payment Event, the following
shall occur:
(a) The Company shall pay the Executive in cash, within five
Business Days after the Severance Payment Event, all of his Base Salary and
all other earned but unpaid cash compensation or entitlements due to the
Executive through (and including) the date of the Severance Payment Event,
including unused earned and accrued vacation pay and unreimbursed reimbursable
business expenses.
(b) The Company shall make the Severance Payment in cash. In its
discretion, the Compensation Committee may elect to make the Severance Payment
in a lump sum or in substantially equal monthly payments over 12 months, which
payment(s) shall be paid or commence to be paid within five Business Days
after the Severance Payment Event.
(c) The Company shall provide or arrange to provide the Executive
(whether or not under any Welfare Benefit Plan then maintained), at the
Company's sole expense and for the Benefit Continuation Period, Welfare
Benefits that are substantially the same the Welfare Benefits provided to the
Executive (and the Executive's spouse, dependents and beneficiaries)
immediately before the Severance Payment Event, except that the Welfare
Benefits to which the Executive is entitled under this subsection (c) will be
subject to the Executive's compliance with the restrictions set out in
Sections 4 through 13, and will be reduced to the extent that comparable
welfare benefits are received by the Executive from an employer other than the
Company or any Subsidiary during the Benefit Continuation Period. (The fact
that the cost of the participation by the Executive, or the Executive's
spouse, dependents or beneficiaries, in any Welfare Benefit Plan was paid
indirectly by the Company, as a reimbursement or a credit to the Executive,
before the Severance Payment Event does not mean that the corresponding
Welfare Benefits were not "provided to the Executive" by the Company for the
purpose of this subsection (c)). Notwithstanding the foregoing, this
subsection (c) shall not apply if the Severance Payment Event is attributable
to the death of Executive; in such event, the Designated Beneficiary, spouse
and dependents of Executive shall be entitled to whatever rights and benefits
they have under the Plans at the time of death and nothing herein shall be
construed to limit such rights and benefits. In the event that the Company
cannot provide coverage under any Welfare Benefit Plan, as described in this
subsection (c), for the entire Benefit Continuation Period, or any portion
thereof, for whatever reason, then the Company shall pay the actuarial
equivalent of the present value of such foregone coverage for Executive (and
his spouse, dependents and beneficiaries, as applicable) directly to Executive
in a cash lump sum payment. Such determination for each affected Welfare
Benefit Plan shall be made in good faith by the Compensation Committee.
(d) Each Stock Award outstanding immediately before the Severance
Payment Event and not yet exercised or forfeited (as the case may be) will
automatically accelerate and become fully vested, exercisable, or
nonforfeitable upon the Severance Payment Event, as though all requisite time
had passed to fully vest the Stock Award or cause it to become exercisable or
nonforfeitable. In addition to Stock Awards, any compensation due under a
performance-based, long-term incentive plan of the Company or a Subsidiary
will automatically accelerate and become fully payable and nonforfeitable upon
the Severance Payment Event, as though all requisite time had passed to fully
vest such compensation and all requisite performance goals attributable
thereto have been fully attained or satisfied.
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In the event of any change to a Welfare Benefits Plan following a
Severance Payment Event, Executive and his spouse, dependents and
beneficiaries, as applicable, shall be treated consistently with the
then-current officers of the Company (or its successor) with respect to the
terms and conditions of coverage and other substantive provisions of the
Welfare Benefits plan. Executive and his spouse hereby agree to acquire and
maintain any and all coverage for themselves and dependents that either or
both of them are entitled to at any time under (i) a health plan offered by
another employer or (ii) the Medicare program or any other medical coverage
program of the United States or any agency thereof.
Notwithstanding any provision of this Agreement to the contrary, in order
to receive the severance benefits payable under Section 3(c) following a
Severance Payment Event, the Executive must first execute an appropriate
release agreement (on a form provided by the Company) whereby the Executive
agrees to release and waive, in return for such severance benefits, any
federal or state claims or causes of action that he has or may have against
the Company or a Subsidiary including, without limitation, for unlawful
discrimination, harassment or retaliation; provided, however, such release
agreement shall not release any claim or cause of action by or on behalf of
the Executive for (a) any payment or benefit that may be due or payable under
this Agreement or any Plan prior to the receipt thereof, (b) any willful
failure by the Company to cooperate with Executive (i) in exercising his
vested stock options or (ii) in the receipt of the proceeds from, or sale of,
his shares of restricted stock in the Company, each in accordance with the
terms of the respective Plan and stock option and restricted stock agreement,
as applicable, (c) non-payment of salary or benefits to which he is entitled
from the Company as of the Severance Payment Event, or (d) a breach of this
Agreement or the Employment Agreement by the Company.
Notwithstanding any provision hereof to the contrary, the severance
benefits and post-termination restrictive covenants as provided in this
Agreement shall not duplicate, or otherwise be in addition to, similar
severance benefits or covenants provided under the Employment Agreement. This
Agreement shall control and govern over the Employment Agreement in such
respect but only upon the occurrence of a Severance Payment Event hereunder.
4. Nondisclosure and Noncompetition. As an inducement to the Company to
enter into this Agreement, the Executive represents to and covenants with or
in favor of the Company his compliance with the restrictive covenants in
Sections 5 through 13, as a condition to the Company's obligation to continue
to provide severance benefits to Executive under Section 3 and to make
Gross-Up Payments to the Executive under Section 14; the Company may refuse to
continue providing those severance benefits or to make any Gross-Up Payment if
there is demonstrable noncompliance by Executive, as reasonably determined in
good faith by the Compensation Committee with notice to Executive and 30 days
to appeal such decision to the Compensation Committee.
5. Trade Secrets.
(a) Access to Trade Secrets. As of the Effective Date and on an
ongoing basis, the Company agrees to give Executive access to Trade Secrets
which the Executive did not have access to, or knowledge of, before the
Effective Date.
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(b) Access to Specialized Training. As of the Effective Date and on
an ongoing basis, the Company has provided, and agrees to provide on an
ongoing basis, Executive with Specialized Training which the Executive does
not have access to, or knowledge of, before the Effective Date.
(c) Agreement Not to Use or Disclose Trade Secrets. In exchange for
the Company's promises to provide Executive with access to Trade Secrets and
Specialized Training and the other benefits provided under this Agreement,
Executive agrees that he will not during the Employment Period, or at any time
thereafter, disclose to anyone, including, without limitation, any person,
firm, corporation or other entity, or publish or use for any purpose, any
Trade Secrets and Specialized Training, except as required in the ordinary
course of the Company's business or as authorized by the Board.
(d) Agreement to Refrain from Defamatory Statements. Executive
shall refrain, both during the Employment Period and thereafter, from
publishing any oral or written statements about any directors, officers,
employees, agents, investors or representatives of the Company or any
Affiliate that are slanderous, libelous, or defamatory; or that disclose
private or confidential information about the business affairs, directors,
officers, employees, agents, investors or representatives of the Company or
any Affiliate; or that constitute an intrusion into the seclusion or private
lives of any of such directors, officers, employees, agents, investors or
representatives; or that give rise to unreasonable publicity about the private
lives of such persons; or that place any such person in a false light before
the public; or that constitute a misappropriation of the name or likeness of
any such person. A violation or threatened violation of these restrictive
covenants may be enjoined by a court of law notwithstanding the arbitration
provisions of Section 22.
6. Duty to Return Company Documents and Property. Upon termination of
the Employment Period, Executive shall immediately return and deliver to the
Company any and all papers, books, records, documents, memoranda and manuals,
e-mail, electronic or magnetic recordings or data, including all copies
thereof, belonging to the Company or relating to its business, in Executive's
possession, whether prepared by Executive or others. If at any time after the
Employment Period, Executive determines that he has any Trade Secrets in his
possession or control, Executive shall immediately return them to the Company,
including all copies thereof.
7. Best Efforts and Disclosure. Executive agrees that, while he is
employed with the Company, he shall devote his full business time and
attention to the Company's business and shall use his best efforts to promote
its success. Further, Executive shall promptly disclose to the Company all
ideas, inventions, computer programs, and discoveries, whether or not
patentable or copyrightable, which he may conceive or make, alone or with
others, during the Employment Period, whether or not during working hours, and
which directly or indirectly:
(a) relate to a matter within the scope, field, duties or
responsibility of Executive's employment with the Company; or
(b) are based on any knowledge of the actual or anticipated business
or interests of the Company; or
(c) are aided by the use of time, materials, facilities or
information of the Company.
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Executive assigns to the Company, without further compensation, any and
all rights, titles and interest in all such ideas, inventions, computer
programs and discoveries in all countries of the world. Executive recognizes
that all ideas, inventions, computer programs and discoveries of the type
described above, conceived or made by Executive alone or with others within 12
months after the Employment Termination Date (voluntary or otherwise), are
likely to have been conceived in significant part either while employed by the
Company or as a direct result of knowledge Executive had of proprietary
information or Trade Secrets. Accordingly, Executive agrees that such ideas,
inventions or discoveries shall be presumed to have been conceived during his
Employment Period, unless and until the contrary is clearly established by the
Executive.
8. Inventions and Other Works. Any and all writings, computer software,
inventions, improvements, processes, procedures and/or techniques which
Executive may make, conceive, discover, or develop, either solely or jointly
with any other person or persons, at any time during the Employment Period,
whether at the request or upon the suggestion of the Company or otherwise,
which relate to or are useful in connection with any business now or hereafter
carried on or contemplated by the Company, including developments or
expansions of its present fields of operations, shall be the sole and
exclusive property of the Company. Executive agrees to take any and all
actions necessary or appropriate so that the Company can prepare and present
applications for copyright or Letters Patent therefor, and secure such
copyright or Letters Patent wherever possible, as well as reissue renewals,
and extensions thereof, and obtain the record title to such copyright or
patents. Executive shall not be entitled to any additional or special
compensation or reimbursement regarding any such writings, computer software,
inventions, improvements, processes, procedures and techniques. Executive
acknowledges that the Company from time to time may have agreements with other
persons or entities which impose obligations or restrictions on the Company
regarding inventions made during the course of work thereunder or regarding
the confidential nature of such work. Executive agrees to be bound by all
such obligations and restrictions, and to take all action necessary to
discharge the obligations of the Company.
9. Non-Solicitation Restriction. To protect Trade Secrets, it is
necessary to enter into the following restrictive covenants which are
ancillary to the enforceable promises between the Company and Executive in
Sections 5 through 8 and other provisions of this Agreement. Only if there is
a Severance Payment Event that results from Executive's voluntary termination
of employment for Good Reason, Executive hereby covenants and agrees that he
will not, directly or indirectly, without the prior written consent of the
Board or the Compensation Committee, either individually or as a principal,
partner, agent, consultant, contractor, employee, or as a director or officer
of any entity, or in any other manner or capacity whatsoever, except on behalf
of the Company, solicit business, or attempt to solicit business, in products
or services competitive with any products or services offered or performed by
the Company or any Subsidiary with respect to any property, drilling program,
or oil or gas development prospect, project or field, in which the Company or
any Subsidiary does business or has any business interest as of the Severance
Payment Event, or either (a) from those individuals or entities with whom the
Company or Subsidiary was involved with, or participated in, any oil or gas
exploration or development project or (b) with respect to any property in
which the Company or Subsidiary had any working, royalty or other interest, at
any time during the two-year period ending on the Employment Termination Date.
The prohibitions set forth in this Section 9 shall remain in effect for a
period of one (1) year following the Employment Termination Date.
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10. Non-Competition Restriction. Executive hereby agrees that in order
to protect Trade Secrets, it is necessary to enter into the following
restrictive covenant which is ancillary to the enforceable promises between
the Company and Executive in Sections 5 through 9 and other provisions of this
Agreement. Only if there is a Severance Payment Event that results from
Executive's voluntary termination of employment for Good Reason, Executive
hereby covenants and agrees that during the Employment Period, and for a
period of one (1) year following the Employment Termination Date due to such
Severance Payment Event, Executive will not, without the prior written consent
of the Board or the Compensation Committee, become interested in any capacity
in which Executive would perform any similar duties to those performed while
at the Company, directly or indirectly (whether as proprietor, stockholder,
director, partner, employee, agent, independent contractor, consultant,
trustee, or in any other capacity), with respect to any property, drilling
program, oil or gas leasehold, project or field, in which the Company or any
Subsidiary participates, or has any investment or other business interest in,
within the Restricted Territory or within five (5) miles of the boundary of
any existing Company leasehold in the United States in which the Company or
Subsidiary has conducted business at any time within the two-year period
immediately preceding the Severance Payment Event within a two-year period
from such date (a "Competing Enterprise"); provided, however, Executive shall
not be deemed to be participating or engaging in a Competing Enterprise solely
by virtue of his ownership of not more than one percent (1%) of any class of
stock or other securities which are publicly traded on a national securities
exchange or in a recognized over-the-counter market.
11. No-Recruitment Restriction. Executive agrees that during the
Employment Period, and for a period of one (1) year following the Employment
Termination Date due to any Severance Payment Event, Executive will not,
either directly or indirectly, or by acting in concert with others, solicit or
influence, or seek to solicit or influence, any employee or independent
contractor performing services for the Company or any Subsidiary to terminate,
reduce or otherwise adversely affect his or her employment or other
relationship with the Company or any Subsidiary.
12. Tolling. If Executive violates any of the restrictions contained in
Sections 5 through 12, then notwithstanding any provision hereof to the
contrary, the restrictive period will be suspended and will not run in favor
of Executive from the time of the commencement of any such violation until the
time when the Executive cures the violation to the reasonable satisfaction of
the Board or Compensation Committee.
13. Reformation. If a court or arbitrator rules that any time period or
the geographic area specified in any restrictive covenant in Sections 5
through 12 is unenforceable, then the time period will be reduced by the
number of months, or the geographic area will be reduced by the elimination of
such unenforceable portion, or both, so that the restrictions may be enforced
in the geographic area and for the time to the full extent permitted by law.
14. Golden Parachute Excise Taxes.
(a) If all or any portion of the Total Severance Benefits payable
under this Agreement as determined without regard to any additional payments
required under this Section 14 (a "Payment"), would be subject to the Excise
Tax, then the Executive shall be entitled to receive an additional payment
("Gross-Up Payment") from the Company in an amount such that after payment by
the Executive of all taxes (including any interest or penalties imposed with
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respect to such taxes), including any income taxes (and any interest and
penalties imposed with respect thereto) and 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 subsection (c) of this Section 14, all
determinations required to be made under this Section 14, including whether
and when a Gross-Up Payment is required, the amount of any Gross-Up Payment,
and the assumptions to be used in arriving at such determination, shall be
made by the Accounting Firm, which shall be retained to provide detailed
supporting calculations to the Parties within 20 Business Days of the
Accounting Firm's receipt of written notice from the Company or the Executive
that there has been a Payment or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be paid solely by
the Company. Each determination by the Accounting Firm shall be binding upon
the Parties. Any Gross-Up Payment determined to be due to the Executive shall
be paid by the Company within five Business Days of the Company's receipt of
the Accounting Firm's determination. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm, it is possible that Gross-Up Payments
not made by the Company should have been made consistent with the calculations
required to be made under this Section 14 ("Underpayment"). If the Company
exhausts its remedies under subsection (c) of this Section 14 and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred, and any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall Notify the Company of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. That Notice shall be given as soon as
practicable, but no later than 20 Business Days after the Executive 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 or
appealed. The Executive shall not pay any amount required by such claim before
the expiration of the 30-day period following the date on which he gives such
Notice (or such shorter period ending on the date that any payment of taxes is
due with respect to such claim). If the Company Notifies the Executive before
the expiration of such period that it desires to contest such claim, the
Executive 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 accepting representation with respect to such claim by counsel or
accountants (or both) selected by the Company and reasonably acceptable to the
Executive;
(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 the Executive, on an after-tax basis,
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for 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 (c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings, and conferences with the taxing
authority in respect of such claim and may, at its sole option, direct the
Executive either to pay the tax claimed and xxx for a refund or to 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. If the Company directs the Executive to pay such claim and
xxx for a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify the Executive, on an
after-tax basis, from any Excise Tax or income tax (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 provided
further, that any extension of the statute of limitations relating to payment
of taxes for the Executive's taxable year with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Further, the Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable under this Section 14,
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.
(d) If, after the Executive's receipt of an amount advanced by the
Company under subsection (c) above, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of subsection (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 Executive's
receipt of an amount advanced by the Company under subsection (c) above, a
determination is made that the Executive is not 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 of refund within 30 days after such
determination, then such advance shall be forgiven and not be required to be
repaid and, in such event, the amount of such advance shall offset, to the
extent thereof, the amount of the Gross-Up Payment required to be paid.
For purposes of calculating any income taxes attributable to the Payment,
Executive shall be deemed for all purposes to be paying income taxes at the
highest marginal federal income tax rate, taking into account any applicable
surtaxes and other generally applicable taxes which have the effect of
increasing the marginal federal income tax rate and, if applicable, at the
highest marginal state income tax rate, to which the Payment and Executive are
subject. An example of the calculation of the Gross-Up Payment is set forth
below. Assume that the Excise Tax rate is 20%, the highest federal marginal
income tax rate is 40% and Executive is not subject to state income taxes.
Further assume that Executive has received an excess parachute payment in the
amount of $200,000, on which $40,000 ($200,000 x 20%) in Excise Taxes are due.
The amount of the required Gross-Up Payment is thus computed to be $100,000,
i.e., the Payment of $100,000, less additional Excise Taxes on the Payment of
$20,000 (i.e., 20% x $100,000) and less income taxes on the Payment of $40,000
(i.e., 40% x $100,000), yields the net of $40,000, which is the amount of the
Excise Taxes owed by Executive in respect of the original excess parachute
payment.
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Executive agrees to reasonably cooperate with the Company to minimize the
amount of the excess parachute payments, including, without limitation,
assisting the Company in establishing that some or all of the payments
received by Executive that are "contingent on a change", as described in
Section 280G(b)(2)(A) of the Code, are reasonable compensation for personal
services actually rendered by Executive before the date of such change or to
be rendered by Executive on or after the date of such change. Notwithstanding
the foregoing, Executive shall not be required to take any action which his
attorney or tax advisor advises him in writing (i) is improper or (ii) exposes
Executive to personal liability. Executive may require the Company to deliver
to Executive an indemnification agreement, in form and substance reasonably
satisfactory to him, as a condition to taking any action required by this
paragraph.
The Company shall make any Gross-Up Payment required to be made under
this Section 14 in a cash lump sum after the date on which Executive received
or is deemed to have received any such excess parachute payment subject to
Excise Tax. Any Gross-Up Payment which is not paid within 10 Business Days of
receipt by the Company of Executive's written demand therefor shall thereafter
be deemed delinquent, and the Company shall pay to Executive immediately upon
demand interest at the rate of 10% per annum from the date such Payment
becomes delinquent to the date of payment of such delinquent sum with
interest.
In the event that there is any change to the Code which results in the
recodification of Section 280G or Section 4999 of the Code, or in the event
that either such section of the Code is amended, replaced or supplemented by
other provisions of the Code of similar import ("Successor Provisions"), then
this Agreement shall be applied and enforced with respect to such new Code
provisions in a manner consistent with the intent of the parties as expressed
herein, which is to assure that Employee is in the same after-tax position and
has received the same benefits that he would have been in and received if any
taxes imposed by Section 4999 (or any Successor Provisions) had not been
imposed.
If the Accounting Firm determines that there is substantial authority
(within the meaning of Section 6662 of the Code) that no Excise Taxes are
payable by Executive, the Accounting Firm shall furnish Executive with a
written opinion that failure to disclose or report the Excise Taxes on
Executive's federal income tax return will not constitute a substantial
understatement of tax or be reasonably likely to result in the imposition of a
negligence or any other penalty.
The Company shall indemnify and hold harmless the Executive, on an
after-tax basis, from any costs, expenses, penalties, fines, interest or other
liabilities ("Losses") incurred by Executive with respect to the exercise by
the Company of any of its rights under this Section 14, including, without
limitation, any Losses related to the Company's decision to contest a claim of
any imputed income to Executive. Any payments owing to Executive under this
Section 14 and not made within 10 Business Days of delivery to the Company of
evidence of Executive's entitlement thereto shall be paid to Executive
together with interest computed at the rate of 10% per annum to the date of
payment of such delinquent sum with interest.
15. Executive's Legal Expenses. The Company shall pay the Executive an
amount equal to the reasonable legal fees and other expenses incurred in good
faith by him in obtaining or retaining payments and benefits under this
Agreement, including all such fees and expenses (if any) in enforcing, in good
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faith, any right or benefit provided by this Agreement or in connection with
the contest or defense of any tax audit or proceeding by the Internal Revenue
Service to the extent that Section 4999 of the Code is alleged or claimed to
apply to any payment or benefit provided under this Agreement. The Company
will be obligated under the preceding sentence even if the Executive is not
successful in any enforcement claim or counterclaim by him, or in any such tax
contest or defense, so long as he acted in good faith. The Company shall make
any payment required by this Section 15 within 20 Business Days after Notice
from the Executive requesting payment and providing such evidence of the
incurrence of those fees and expenses as the Company may reasonably request.
16. No Mitigation. If a Severance Payment Event occurs, the Executive
need not seek other employment or attempt in any way to reduce the amount of
payments due to Executive under this Agreement, except as expressly provided
in Section 3.
17. No Set-off. The Company's obligations under this Agreement are
absolute and unconditional, and not subject to any set-off, counterclaim,
recoupment, defense, or other right that the Company or any Subsidiary may
have against the Executive, except as expressly provided in Section 3 and
Section 14.
18. Tax Withholding. The Company shall withhold from any payments or
benefits under this Agreement (whether or not otherwise acknowledged under
this Agreement) all federal, state, local, or other taxes as it is legally
required to withhold.
19. Employment Status. Nothing in this Agreement provides the Executive
with any right to continued employment with the Company or any Subsidiary, or
shall interfere with the Company's right to terminate the Executive's
employment at any time subject to the Company's obligations under the
Employment Agreement.
20. No Exclusivity. Nothing in this Agreement prevents or limits the
Executive's participation in any Plan for which the Executive may qualify or
shall impair any rights that the Executive may have under any other contract
or agreement with the Company or any Subsidiary.
21. Indemnification. The Company shall indemnify, defend and hold
harmless the Executive from and against any and all liability, costs and
damages arising from his service as an employee, officer or director of the
Company and/or its Affiliates as required by the articles of incorporation or
bylaws of the Company. This Section 21 shall not limit in any way the rights
of Executive to any other indemnification from the Company or an Affiliate, as
a matter of law, contract or otherwise.
22. Mandatory Arbitration. Except as provided in subsection (h) of this
Section 22, any Dispute must be resolved by binding arbitration in accordance
with the following:
(a) Either Party may begin arbitration by filing a demand for
arbitration in accordance with the Arbitration Rules and concurrently
Notifying the other Party of that demand. If the Parties are unable to agree
upon a panel of three arbitrators within ten days after the demand for
arbitration was filed (and do not agree to an extension of that ten-day
period), either Party may request the Denver office of the American
Arbitration Association ("AAA") to appoint the arbitrator or arbitrators
10
necessary to complete the panel in accordance with the Arbitration Rules. Each
arbitrator so appointed shall be deemed accepted by the Parties as part of the
panel.
(b) The arbitration shall be conducted in the Denver, Colorado
metropolitan area at a place and time agreed upon by the Parties with the
panel, or if the Parties cannot agree, as designated by the panel. The panel
may, however, call and conduct hearings and meetings at such other places as
the Parties may agree or as the panel may, on the motion of one Party,
determine to be necessary to obtain significant testimony or evidence.
(c) The panel may authorize any and all forms of discovery upon a
Party's showing of need that the requested discovery is likely to lead to
material evidence needed to resolve the Dispute and is not excessive in scope,
timing, or cost.
(d) The arbitration shall be subject to the Federal Arbitration Act
and conducted in accordance with the Arbitration Rules to the extent that they
do not conflict with this Section 22. The Parties and the panel may, however,
agree to vary to provisions of this Section 22 or the matters otherwise
governed by the Arbitration Rules.
(e) The arbitration hearing shall be held within 60 days after the
appointment of the panel. The panel's final decision or award shall be made
within 30 days after the hearing. That final decision or award shall be made
by unanimous or majority vote or consent of the arbitrators constituting the
panel, and shall be deemed issued at the place of arbitration. The panel's
final decision or award shall be based on this Agreement and applicable law.
(f) The panel's final decision or award may include injunctive
relief in response to any actual or impending breach of this Agreement or any
other actual or impending action or omission of a Party under or in connection
with this Agreement.
(g) The panel's final decision or award shall be final and binding
upon the Parties, and judgment upon that decision or award may be entered in
any court having jurisdiction. The Parties waive any right to apply or appeal
to any court for relief from the preceding sentence or from any decision of
the panel made before the final decision or award.
(h) Nothing in this Section 22 limits the right of either Party to
apply to a court having jurisdiction to (i) enforce the agreement to arbitrate
in accordance with this Section 22, (ii) seek provisional or temporary
injunctive relief, in response to an actual or impending breach of the
Agreement or otherwise so as to avoid an irreparable damage or maintain the
status quo, until a final arbitration decision or award is rendered or the
Dispute is otherwise resolved, or (iii) challenge or vacate any final
arbitration decision or award that does not comply with this Section 22. In
addition, nothing in this Section 22 prohibits the Parties from resolving any
Dispute (in whole or in part) by agreement.
The panel may proceed to an award notwithstanding the failure of any
Party to participate in such proceedings. The prevailing Party in the
arbitration proceeding may be entitled to an award of reasonable attorneys'
fees incurred in connection with the arbitration in such amount, if any, as
determined by the panel in its discretion. The costs of the arbitration shall
be borne equally by the Parties unless otherwise determined by the panel in
its award.
11
The panel shall be empowered to impose sanctions and to take such other
actions as it deems necessary to the same extent a judge could impose
sanctions or take such other actions pursuant to the Federal Rules of Civil
Procedure and applicable law. Each party agrees to keep all Disputes and
arbitration proceedings strictly confidential except for disclosure of
information required by applicable law which cannot be waived.
This Section 22 shall not preclude the Parties at any time from mutually
agreeing to pursue non-binding mediation of the Dispute.
23. Company's Successor. In addition to any obligations imposed by law
upon any successor to the Company, the Company shall require any successor to
all or substantially all of the Company's business or assets (whether direct
or indirect and whether by purchase, reorganization, merger, share exchange,
consolidation, or otherwise) to expressly assume and agree to perform the
Company's obligations under this Agreement to the same extent, and in the same
manner, as the Company would be required to perform if no such succession had
occurred. This Agreement shall be binding upon, and inure to the benefit of,
any successor to the Company.
24. Executive's Successor. This Agreement shall inure to the benefit of,
and be enforceable by, the Executive's personal or legal representatives,
Designated Beneficiary, administrators, executors and heirs. If the Executive
should die after a Severance Payment Event, but before any payment or benefit
to which the Executive is entitled under this Agreement has been received by
the Executive, all payments or benefits to which the Executive would have been
entitled had he continued to live (other than any such Welfare Benefits that,
by their terms, terminate upon the Executive's death) shall be made or
provided in accordance with this Agreement to the representatives, executors,
or administrators of the Executive's estate.
25. Restricted Assignment. Except as expressly provided in Sections 23
and 24, neither Party may assign, transfer, or delegate this Agreement or any
of its or his rights or obligations under this Agreement without the prior
written consent of the other Party. Any attempted assignment, transfer, or
delegation in violation of the preceding sentence shall be void and of no
effect.
26. Waiver and Amendment. No term or condition of this Agreement shall
be deemed waived other than by a writing signed by the Party against whom or
which enforcement of the waiver is sought. Without limiting the generality of
the preceding sentence, a Party's failure to insist upon the other Party's
strict compliance with any provision of this Agreement or to assert any right
that a Party may have under this Agreement shall not be deemed a waiver of
that provision or that right. Any written waiver shall operate only as to the
specific term or condition waived under the specific circumstances and shall
not constitute a waiver of that term or condition for the future or a waiver
of any other term or condition. No amendment or modification of this Agreement
shall be deemed effective unless stated in a writing signed by the Parties.
27. Entire Agreement. This Agreement, including the Statement of
Purpose, contains the Parties' entire agreement regarding the subject matter
of this Agreement and supersedes all prior agreements and understandings
between them regarding such subject matter. The Parties have made no
agreements, representations, or warranties regarding the subject matter of
this Agreement that are not set forth in this Agreement.
12
28. Notice. Each notice or other communication required or permitted
under this Agreement shall be in writing and transmitted, delivered, or sent
by personal delivery, prepaid courier or messenger service (whether overnight
or same-day), prepaid telecopy or facsimile, or prepaid certified United
States mail (with return receipt requested), addressed (in any case) to the
other Party at the address for that Party set forth below that Party's
signature on this Agreement, or at such other address as the recipient has
designated by Notice to the other Party.
Each notice or communication so transmitted, delivered, or sent (a) in
person, by courier or messenger service, or by certified United States mail
shall be deemed given, received, and effective on the date delivered to or
refused by the intended recipient (with the return receipt, or the equivalent
record of the courier or messenger, being deemed conclusive evidence of
delivery or refusal.) Nevertheless, if the date of delivery is after 5:00
p.m. on a Business Day, the notice or other communication shall be deemed
given, received, and effective on the next Business Day.
29. Executive Acknowledgment. Executive acknowledges that (a) he is
knowledgeable and sophisticated as to business matters, including the subject
matter of this Agreement, (b) he has read this Agreement and understands its
terms and conditions, (c) he has had ample opportunity to discuss this
Agreement with his legal counsel prior to execution, and (d) no strict rules
of construction shall apply for or against the drafter or any other Party.
Executive represents that he is free to enter into this Agreement including,
without limitation, that he is not subject to any restrictive covenant that
would conflict with his duties under this Agreement.
30. Severability. It is the desire of the Parties hereto that this
Agreement be enforced to the maximum extent permitted by law, and should any
provision contained herein be held unenforceable by a court of competent
jurisdiction or arbitrator (pursuant to Section 22), the Parties hereby agree
and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided,
however, if such provision cannot be reformed, it shall be deemed ineffective
and deleted herefrom without affecting any other provision of this Agreement.
This Agreement should be construed by limiting and reducing it only to the
minimum extent necessary to be enforceable under then applicable law.
31. Title and Headings; Construction. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. The words "herein", "hereof",
"hereunder" and other compounds of the word "here" shall refer to the entire
Agreement and not to any particular provision.
32. Governing Law; Jurisdiction. All matters or issues relating to the
interpretation, construction, validity, and enforcement of this Agreement
shall be governed by the laws of the State of Colorado, without giving effect
to any choice-of-law principle that would cause the application of the laws of
any jurisdiction other than Colorado. Jurisdiction and venue of any action or
proceeding relating to this Agreement or any Dispute (to the extent
arbitration is not required under Section 22) shall be exclusively in Denver,
Colorado.
33. Survival of Certain Provisions. Wherever appropriate to the
intention of the Parties, the respective rights and obligations of the Parties
hereunder shall survive any termination or expiration of this Agreement.
13
34. Counterparts. This Agreement may be signed in counterparts, with the
same effect as if both Parties had signed the same document. All counterparts
shall be construed together to constitute one, and the same, document.
[Signature page follows.]
14
IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective as of the Effective Date first above written.
WITNESS: EXECUTIVE:
Signature: /s/ Xxxx X. Xxxxx Signature: /s/ Xxxxx X. Xxxxx
Name: Xxxx X. Xxxxx Name: Xxxxx X. Xxxxx
Date: May 5, 2005 Date: May 5, 2005
Address for Notices:
c/o Delta Petroleum Corp.
000 00xx Xxxxxx, #0000
Xxxxxx, XX 00000
ATTEST: COMPANY:
By: /s/ Xxxxxx X. Xxxxxx, Xx. By: /s/ Xxxxx X. Xxxxxx
Title: Chairman/Secretary Its: President and CEO
Name: Xxxxxx X. Xxxxxx, Xx. Name: Xxxxx X. Xxxxxx
Date: 5/5/2005 Date: 5/5/2005
Address for Notices:
Delta Petroleum Corporation
c/o Chairman of the Board
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
15
EXHIBIT A
TO
CHANGE-IN-CONTROL EXECUTIVE SEVERANCE AGREEMENT
DEFINED TERMS. In the Agreement, the following terms have the
corresponding meanings:
"Accounting Firm" means an independent certified public accounting firm
selected by the Company and reasonably acceptable to the Executive; provided,
however, the firm selected must be within the top 15 in the United States at
such time based on annual revenues for CPA firms in the preceding year.
"Acquiring Person" means any Person (other than an Excluded Person) who
or which, alone or together with all Affiliates and Associates of that Person,
is the Beneficial Owner of 35% or more of the Voting Securities of the Company
then outstanding.
"Affiliate" and "Associate" have the respective meanings ascribed to them
in Rule 12b-2 under the Exchange Act.
"Agreement" means the Change-in-Control Executive Severance Agreement
between the Parties, as may hereafter be amended or supplemented, of which
this Exhibit A is a part.
"Arbitration Rules" means the Rules for Commercial Arbitration of the
American Arbitration Association as in effect at the time of arbitration of a
Dispute.
"Base Salary" means the Executive's annual Base Salary from the Company
under, and as defined in, the Employment Agreement.
"Beneficial Owner" means beneficial owner as defined in Rule 13d-3 under
the Exchange Act. ("Beneficially Owns" has the correlative meaning.) Any
calculation of the number of Voting Securities outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding Voting Securities of which any Person is the Beneficial Owner,
shall be made in accordance with Rule 13d-3(d)(1)(i) under the Exchange Act.
"Benefit Continuation Period" means 36 consecutive months after a
Severance Payment Event.
"Board" means the Board of Directors of the Company.
"Business Day" means any Monday through Friday, excluding any such day on
which banks are authorized to be closed in Colorado.
"Cause" means any of the following: (A) the Executive's conviction by a
court of competent jurisdiction as to which no further appeal can be taken of
a crime involving moral turpitude or a felony or entering the plea of nolo
contendere to such crime by the Executive; (B) the commission by the Executive
of a material and demonstrable act of fraud, or a material and demonstrable
misappropriation of funds or property, of or upon the Company or any
Affiliate; (C) the knowing engagement by the Executive, without the written
approval of the Board or Compensation Committee, in any material activity
which directly competes with the business of the Company or any Affiliate, or
which would directly result in a material injury to the business or reputation
A-1
of the Company or any Affiliate; or (D) (i) the material breach by Executive
of any material provision of this Agreement or the Employment Agreement, or
(ii) the willful, material and repeated nonperformance of Executive's duties
to the Company or any Subsidiary (other than by reason of Executive's illness
or incapacity), but only under clauses (C), (D) (i) or (D) (ii) after Notice
from the Board or Compensation Committee of such material breach or
nonperformance (which Notice specifically identifies the manner and sets forth
specific facts, circumstances and examples of which the Board or Compensation
Committee believes that Executive has breached the Agreement or the Employment
Agreement or not substantially performed his duties) and his continued willful
failure to cure such breach or nonperformance within the time period set by
the Board or Compensation Committee but in no event more than 60 calendar days
after his receipt of such Notice; and, for purposes of clause (D), no act or
failure to act on Executive's part shall be deemed "willful" unless it is done
or omitted by Executive without his reasonable belief that such action or
omission was in the best interest of the Company (assuming disclosure of the
pertinent facts, any action or omission by Executive after consultation with,
and in accordance with the advice of, legal counsel reasonably acceptable to
the Company shall be deemed to have been taken in good faith and to not be
willful for purposes of this Agreement).
"Change in Control" means the occurrence of any one or more of the
following:
(i) Any Person becomes an Acquiring Person, except as the result of
(A) any acquisition of Voting Securities of the Company by the Company or (B)
any acquisition of Voting Securities of the Company directly from the Company
(as authorized by the Board).
(ii) Individuals who constitute the Incumbent Board cease for any
reason to constitute at least a majority of the Board unless such change was
approved by at least two-thirds (2/3) of the Incumbent Board; and for this
purpose, any individual who becomes a member of the Board after the date of
this Agreement whose election, or nomination for election by holders of the
Company's Voting Securities, was approved by the vote of at least a majority
of the individuals then constituting the Incumbent Board shall be considered a
member of the Incumbent Board (except that any such individual whose initial
election as director occurs as the result of an actual or threatened election
contest, within the meaning of Rule 14a-11 under the Exchange Act, or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board shall not be so considered).
(iii) The consummation of a reorganization, merger, share exchange,
consolidation, or sale or disposition of all or substantially all of the
assets of the Company unless, in any case, the Persons who or which
Beneficially Own the Voting Securities of the Company immediately before that
transaction Beneficially Own, directly or indirectly, immediately after the
transaction, at least 70% of the Voting Securities of the Company or any other
corporation or other entity resulting from or surviving the transaction
(including a corporation or other entity which, as the result of the
transaction, owns all or substantially all of Voting Securities of the Company
or all or substantially all of the Company's assets, either directly or
indirectly through one or more subsidiaries) in substantially the same
proportion as their respective ownership of the Voting Securities of the
Company immediately before that transaction.
(iv) The Company's shareholders approve a complete liquidation or
dissolution of the Company or a sale of substantially all of its assets.
A-2
"Code" means the Internal Revenue Code of 1986, as amended from time to
time. References herein to any Section of the Code shall include any
successor provisions of the Code.
"Common Stock" means the common stock, $.01 par value per share, of the
Company.
"Company" means Delta Petroleum Corporation, a Colorado corporation.
"Compensation Committee" means the then-current compensation committee of
the Board.
"Disability" shall mean that Executive is entitled to receive long-term
disability ("LTD") income benefits under the LTD plan or policy maintained by
the Company that covers Executive. If, for any reason, Executive is not
covered under such LTD plan or policy, then "Disability" shall mean a
"permanent and total disability" as defined in Section 22(e)(3) of the Code
and Treasury regulations thereunder. Evidence of such Disability shall be
certified by a physician acceptable to both the Company and Executive. In the
event that the Parties are not able to agree on the choice of a physician,
each shall select one physician who, in turn, shall select a third physician
to render such certification. All costs relating to the determination of
whether Executive has incurred a Disability shall be paid by the Company.
Executive agrees to submit to any examinations that are reasonably required by
the attending physician to determine whether he has a Disability.
"Designated Beneficiary" means the Executive's surviving spouse, if any.
If there is no such surviving spouse at the time of Executive's death, then
the Designated Beneficiary hereunder shall be Executive's estate.
"Dispute" means any dispute, disagreement, claim, or controversy arising
in connection with or relating to the Agreement or the validity,
interpretation, performance, breach, or termination of the Agreement.
"Employment Agreement" means the Executive Employment Agreement between
the Parties dated as of May 5, 2005, as may hereafter be amended or
supplemented.
"Employment Period" means the time period during which Executive is
employed as an employee or officer of the Company or any Subsidiary.
"Employment Termination Date" means the date that the Executive's
employment with the Company and any Subsidiary is terminated for whatever
reason.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Excise Tax" means the excise tax imposed by Section 4999 of the Code,
with all interest and penalties, if any, incurred with respect to such excise
tax.
"Excluded Person" means:
(i) the Executive or any group (within the meaning of Section
13(d)(3) of the Exchange Act) of which the Executive is a member;
A-3
(ii) any Person that controls (as defined in Rule 12b-2 under the
Exchange Act) the Company as of the date of the Agreement or any group of
which any such Person is a member;
(iii) any employee-benefit plan, or related trust, sponsored or
maintained by the Company or any of its Subsidiaries, or any trustee or other
fiduciary thereof; or
(iv) any corporation or other entity owned directly or indirectly
by the shareholders of the Company in substantially the same proportions as
their ownership of the Voting Securities of the Company.
"Good Reason" means the occurrence of any one or more of the following
events (within the period beginning six (6) months prior to a Change in
Control and ending at the end of the twenty-fourth (24th) month immediately
following the month in which the Change in Control occurred), except as a
result of actions taken in connection with termination of the Executive's
employment for Cause or Disability, and without Executive's specific written
consent:
(i) If the Company becomes a division, a wholly or majority-owned
subsidiary or other similar captive entity of another person or entity or
combination thereof (i.e. of a "parent"); and if the Executive is not placed
in the identical or equivalent position within the parent person or entity
then such occurrence will be deemed to be an assignment of duties materially
inconsistent with Executive's position as described above thereby constituting
Good Reason. The assignment to the Executive of any duties inconsistent in
any material respect with the Executive's position, within the 6 month period
prior to change in control or two years thereafter, which in this definition
includes status, reporting relationship to the top-paid corporate executive,
office, title, scope of responsibility over corporate level staff or
operations functions, or responsibilities as an officer of the Company or any
other material diminution in the Executive's position, authority, duties, or
responsibilities, other than (in any case or circumstance) an isolated and
inadvertent action not taken in bad faith that is remedied by the Company
promptly within 30 days after Notice thereof to the Company by the Executive;
(ii) the Company's requiring the Executive to be based at any
office or location farther than 35 miles from the Executive's office or
principal job location immediately before such change, except for required
business travel to an extent substantially consistent with the Executive's
travel obligations immediately before the change;
(iii) a reduction in the Executive's Base Salary or annual bonus
opportunity of more than five percent (5%) from the highest amount in effect
at any time within six months before the Change in Control;
(iv) a failure of the Company to provide salary increases to
Executive as consistent with the market and, in the event of a disagreement
between the Parties, such determination shall be made by the Compensation
Committee based on the appropriate base pay annual adjustment norms for
similar executives as determined from the Conference Board's Annual Salary
Increase Budget publication (or an equivalent independent authoritative source
as determined by the Compensation Committee);
(v) the failure by the Company or any Subsidiary to continue to
provide the Executive with compensation that is equal or comparable to the
Executive's total compensation under the Employment Agreement as in effect
A-4
immediately before the change, unless an equitable arrangement (embodied in an
ongoing substitute or alternative Plan or arrangement) has been made with
respect to that compensation or any component thereof, or the failure by the
Company or any Subsidiary to continue the Executive's participation in any
compensation Plan in which the Executive participates immediately before the
change (or in any substitute or alternative Plan or arrangement) on a basis
not materially less favorable to the Executive, both in terms of the amount of
benefits provided and the level of the Executive's participation relative to
other participants, than existed at any time within six (6) months before the
Change in Control; or
(vi) the failure by the Company or any Subsidiary to continue to
provide the Executive with benefits similar in all material respects to those
enjoyed by the Executive under the Employment Agreement and under any Plan in
which the Executive was participating at any time within six (6) months before
the Change in Control, the taking of action by the Company or any Subsidiary
which would directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the Executive
at any time within six (6) months before the Change in Control, or the failure
by the Company or any Subsidiary to provide the Executive with the number of
paid vacation days to which the Executive is entitled on the basis of years of
service with the Company and its Subsidiaries in accordance with the Company's
or a Subsidiary's vacation policy in effect at any time within six (6) months
before the Change in Control.
(vii) Any failure by the Company to obtain an assumption of this
Agreement by its successor in interest pursuant to Section 23.
Notwithstanding the foregoing definition of "Good Reason", the Executive
cannot terminate his employment hereunder for Good Reason unless he (a) first
notifies the Board or Compensation Committee in writing of the event (or
events) which the Executive believes constitutes a Good Reason event under
subparagraphs (i), (ii), (iii), (iv), (v), (vi) or (vii) (above) within 150
calendar days from the date of such event, and (b) provides the Company with
at least 30 calendar days to cure, correct or mitigate the Good Reason event
so that it either (1) does not constitute a Good Reason event hereunder or (2)
Executive specifically agrees, in writing, that after any such modification or
accommodation made by the Company that such event shall not constitute a Good
Reason event hereunder.
"Incumbent Board" means the members of the Board on the effective date of
the Agreement (subject, however, to clause (ii) of the definition of "Change
in Control").
"Notice" means a written communication complying with Section 28
("Notify" has the correlative meaning).
"Parties" means, collectively, the Company and the Executive. ("Party"
means either the Company or the Executive).
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, or other entity, including any successor (by merger
or otherwise) of such entity.
A-5
"Plan" means any bonus, incentive compensation, savings, retirement,
stock option, stock appreciation, stock ownership or purchase, pension,
deferred compensation, or Welfare Benefits plan, policy, practice, program, or
arrangement of (including any separate contract or agreement with) the Company
or any Subsidiary for its employees, but does not include the Employment
Agreement.
"Restricted Territory" means, collectively Denver, Colorado (and within a
100-mile radius of the boundaries of Denver, Colorado); each county (or
equivalent subdivision) of any state, district, or territory of the United
States of America as to which the Company conducts its business; and each
county (or equivalent territory) adjacent to any of the preceding counties (or
equivalent territories).
"Severance Payment" means an amount equal to three (3) times the sum of:
(i) the Executive's highest Base Salary in effect at any time
within 12 months before the Change in Control; plus
(ii) the highest amount of the annual automobile allowance payable
to the Executive within 12 months before the Change in Control; plus
(iii) an amount equal to the annual average of the annual bonuses
(includes any incentive cash compensation) paid or payable to the Executive by
the Company and any Subsidiary for the three fiscal years of the Company
immediately preceding the fiscal year in which the Change in Control occurs,
but not less than the greater of (a) Executive's highest annual target bonus
during any of these three preceding fiscal years or (b) the Executive's
targeted bonus for the fiscal year in which the Change in Control occurs.
Notwithstanding the foregoing provisions of this definition, in the
event that the Severance Payment Event is attributable to termination of
Executive's employment due to his death or Disability, the term "three (3)
times" shall be replaced by "two (2) times" in the first line of this
definition.
For clause (iii) of this definition: (a) the calculation of the average
of the annual bonuses of the Executive shall include a fiscal year during
which the Executive was employed by the Company and a participant in a bonus
or incentive cash compensation Plan even if the Executive did not earn any
bonus or incentive cash compensation for that fiscal year; (b) the bonus or
incentive cash compensation paid or payable to the Executive for only part of
a fiscal year of the Company shall be annualized (on the same basis as the one
on which the bonus or compensation was prorated) for that fiscal year to
calculate the average; and (c) the "targeted bonus" for the fiscal year of the
Company in which the Change in Control occurs shall be the amount identified
as a "target" by the Board (or the committee thereof that administers the
bonus or incentive cash compensation Plan) for the Executive.
"Severance Payment Event" means the termination of the Executive's
employment with the Company and all Affiliates, for any reason other than (a)
voluntarily by the Executive without Good Reason or (b) involuntarily by the
Company for Cause, which termination occurs at any time within the period
beginning six (6) months prior to a Change in Control and ending at the end of
the twenty-fourth (24th) month immediately following the month in which the
Change in Control occurred. Any termination of Executive's employment that
does not occur within the prescribed time limits, or is otherwise not
described in the first sentence hereof, shall not be considered a Severance
A-6
Payment Event. Any transfer of the Executive's employment from the Company to
an Affiliate, from an Affiliate to the Company, or from one Affiliate to
another Affiliate, is not a termination of the Executive's employment by the
Company for purposes of the Agreement (though any such transfer might,
depending on the circumstances, constitute or result in a termination of
employment by the Executive for Good Reason).
"Specialized Training" includes the training the Company provides to
Executive that is unique to its business and enhances Executive's ability to
perform Executive's job duties effectively. Specialized Training includes,
without limitation, sales methods/techniques training; operation methods
training; engineering and scientific training; and computer and systems
training.
"Stock Award" means a stock option, stock appreciation right, restricted
stock grant, performance share plan, or any other agreement in which the
Executive has, or will (by the passage of time only, not based on the
Executive's performance) have, (a) an interest in capital stock of the Company
or a right to obtain capital stock or an interest in capital stock of the
Company, or (b) an interest or right whose economic value depends solely on
the performance of the capital stock of the Company.
"Subsidiary" means a corporation or other entity, whether incorporated or
unincorporated, of which at least a majority of the Voting Securities is
owned, directly or indirectly, by the Company.
"Total Severance Benefits" means the Severance Payment; all other
payments and benefits received or to be received by the Executive under the
Agreement; and all payments, awards, distributions, and benefits (and
accelerations of any payment, award, distribution, or benefit), if any, to
which the Executive may be entitled, under any Plan or any other contract or
agreement, upon or as the result of a Change in Control or the termination of
his employment with the Company, or both.
"Trade Secrets" means any and all information and materials (in any form
or medium) that are proprietary to the Company or a Subsidiary, or are treated
as confidential by the Company or Subsidiary as part of, or relating to, all
or any portion of its or their business, including information and materials
about the products and services offered, or the needs of customers served, by
the Company or Subsidiary; compilations of information, records and
specifications, properties, processes, programs, and systems of the Company or
Subsidiary; research of or for the Company or Subsidiary; and methods of doing
business of the Company or Subsidiary. Trade Secrets include, without
limitation, all of the Company's or Subsidiary's technical and business
information, whether patentable or not, which is of a confidential, trade
secret or proprietary character, and which is either developed by the
Executive alone, with others or by others; lists of customers; identity of
customers; existing or prospective oil or gas properties, investors,
participation agreements, working, royalty or other interests; contract terms;
bidding information and strategies; pricing methods or information; computer
software; computer software methods and documentation; hardware; the Company's
or Subsidiary's methods of operation; the procedures, forms and techniques
used in servicing accounts or properties; seismic, geophysical, petrophysical,
or geological data; well logs and other well data; and other documents,
information or data that the Company requires to be maintained in confidence
for the Company's business success.
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"Voting Securities" means securities or other interests having by their
terms ordinary voting power to elect members of the board of directors of a
corporation or individuals serving similar functions for a noncorporate
entity.
"Welfare Benefits" means medical, prescription, dental, disability, group
life, and accidental death insurance (whether funded by insurance policy or
self-insured by the Company or any Subsidiary) provided or arranged by the
Company or any Subsidiary to be provided to its employees or former employees.
"Welfare Benefit Plan" means any Plan that provides any Welfare Benefits.
INTERPRETIVE MATTERS. In the interpretation of the Agreement, except
where the context otherwise requires:
(a) "including" or "include" does not denote or imply any limitation;
(b) "or" has the inclusive meaning "and/or";
(c) the singular includes the plural, and vice versa, and each gender
includes each of the others;
(d) captions or headings are only for reference and are not to be
considered in interpreting the Agreement;
(e) "Section" refers to a Section of the Agreement, unless otherwise
stated in the Agreement;
(f) "month" refers to a calendar month; and
(g) a reference to any statute, rule, or regulation includes any
amendment thereto or any statute, rule, or regulation enacted or promulgated
in replacement thereof.
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