1
Exhibit 10.22
SEVERANCE AGREEMENT
This Severance Agreement ("Agreement") is made and entered into as of
December 1, 1998, by and between Petroglyph Energy, Inc., a Delaware corporation
(the "Company"), and [individual listed on Exhibit A], an individual currently
residing in Hutchinson, Kansas ("Employee").
RECITALS
The Board of Directors of the Company (the "Board") has determined that
it is in the best interest of the Company to assure that the Company will have
the continued dedication of Employee, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below). The Board believes it is
imperative to diminish the inevitable distraction of Employee by virtue of the
personal uncertainties and risks created by a pending or threatened Change of
Control, to encourage Employee's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide Employee with compensation and benefit arrangements upon a Change of
Control which insures that such compensation and benefits are competitive with
other corporations.
AGREEMENT
Now, therefore, in consideration of Employee's continued employment by
the Company, as well as the promises, covenants and obligations contained
herein, the Company and Employee agree as follows:
1. Payment of Severance Amount. Upon the occurrence of a Termination
Event (as defined in paragraph 2), the Company shall:
(a) pay Employee an amount equal to (i) Employee's Base Annual
Salary (as defined in paragraph 2) multiplied by the Employment Term
Factor (as defined in paragraph 2), less (ii) the amount of salary and
bonus payments received by Employee during the period from the Change
of Control until the Termination Event, payable as a lump sum cash
payment within 30 business days after the date of the termination
constituting such Termination Event (the "Termination Date");
(b) (i) provide Employee with life and disability insurance
and (ii) pay Employee an amount equal to the cost of medical insurance
coverage at the level provided as of the Termination Date, both for a
period following the Termination Date equal to (A) eighteen months less
(B) the number of months (rounded to the nearest whole month) during
the period from the Change of Control until the Termination Event, or,
if earlier with respect to clause (ii) above only, until Employee shall
obtain substantially equivalent insurance coverage from a subsequent
employer. Employee shall immediately notify the Company upon obtaining
any insurance from a subsequent employer and shall provide all
information required by the Company regarding such insurance to enable
the Company to make a determination of whether such insurance is
substantially equivalent;
(c) for a period of twelve months from and after such
Termination Event, or until such earlier time as Employee obtains other
employment, provide Employee (at no cost to Employee) with outplacement
services of a firm of Employee's choice; and
(d) pay all reasonable legal fees and expenses incurred by
Employee in seeking to obtain or enforce any right or benefit provided
by this Agreement.
2
2. Definitions.
(a) A "Termination Event" shall be deemed to have occurred if:
(i) at any time within 180 days following a Change of
Control:
(A) the Company or any successor thereto
shall terminate Employee's employment for any reason
other than for Cause; or
(B) Employee shall voluntarily terminate his
employment with the Company or any successor thereto
for "Good Reason." For purposes of this Agreement,
"Good Reason" shall mean any of the following
(without Employee's express written consent):
(1) A material change in the nature
or scope of Employee's duties from those
engaged in by Employee immediately prior to
the date on which a Change of Control
occurs;
(2) A reduction in Employee's base
salary from that provided to him immediately
prior to the date the Change of Control
occurs;
(3) A material diminution in
Employee's eligibility to participate in or
in benefits provided to Employee under
bonus, stock option or other incentive
compensation plans or employee welfare and
pension benefit plans (including medical,
dental, life insurance, retirement and
long-term disability plans) from that
provided to him immediately prior to the
date the Change in Control occurs; or
(4) Any required relocation of
Employee of more than thirty miles from the
location where Employee was based and
performed services on the date of this
Agreement (including any required business
travel in excess of the greater of 90 days
per year or the level of business travel of
Employee for the year prior to the most
recent Change of Control); or
(ii) Employee and the Company, or any successor
thereto, shall fail to reach an agreement on or prior to the
date of closing of a transaction that constitutes a Change of
Control as to the terms of Employee's employment following
such Change of Control, which terms are acceptable to Employee
in his sole discretion.
(b) A "Change of Control" shall be deemed to have occurred if:
(i) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least fifty percent (50%) of the
Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election
by the Company's stockholders was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be, for purposes of this Agreement,
considered as though such person were a member of the
Incumbent Board; or
-2-
3
(ii) the stockholders of the Company shall approve a
reorganization, merger or consolidation, in each case, with
respect to which persons who were the stockholders of the
Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than
fifty percent (50%) of the combined voting power entitled to
vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding
voting securities, or of a liquidation or dissolution of the
Company or of the sale of all or substantially all of the
assets of the Company; or
(iii) the stockholders of the Company shall approve a
sale of all or substantially all of the assets of the Company;
or
(iv) a stock sale, reorganization, merger or
consolidation of the Company takes place and the Company
and/or its subsidiaries do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote
generally in the election of directors of the sold,
reorganized, merged or consolidated company's then outstanding
voting securities; or
(v) all or substantially all of the assets of the
Company are sold.
(c) "Employment Factor" is the factor shown on the attached
Exhibit A, which is incorporated herein by this reference for all
purposes.
(d) "Base Annual Salary", as determined on the Termination
Date, shall be equal to the greater of (i) Employee's annual salary on
the date of the earliest Change of Control to occur during the
eighteen-month period prior to the Termination Date plus any bonuses or
special incentive payments received in the twelve-month period prior to
such Change of Control or (ii) Employee's annual salary on the
Termination Date plus any bonuses or special incentive payments
received in the twelve-month period prior to the Termination Date.
(e) "Cause" as used herein with respect to Employee's
termination of employment shall include any of the following: (A)
Employee's conviction of, or plea of nolo contendere to, any felony or
to any crime or offense causing substantial harm to the Company or its
affiliates or involving acts of theft, fraud, embezzlement, moral
turpitude or similar conduct; (B) malfeasance in the conduct of
Employee's duties, including, but not limited to, (1) willful and
intentional misuse or diversion of funds of the Company, or its
affiliates, that constitutes willful misconduct or gross negligence on
the part of Employee, (2) embezzlement, or (3) fraudulent or willful
and material misrepresentations or concealments on any written reports
submitted to the Company or its affiliates; or (C) Employee's material
failure to perform the duties of Employee's employment or material
failure to follow or comply with the reasonable and lawful written
directives of the Board of Directors of the Company, in either case
after Employee shall have been informed, in writing, of such material
failure and given a period of not more than 60 days to remedy same. For
purposes of this paragraph, no act, or failure to act, on Employee's
part shall be considered "willful" unless done, or omitted to be done,
by Employee not in good faith and without reasonable belief that
Employee's action or omission was in the best interest of the Company.
Notwithstanding the foregoing, Employee shall not be deemed to have
been terminated for cause unless and until there shall have been
delivered to Employee a copy of a notice of termination from the Chief
Executive Officer of the Company or the Board of Directors, after
reasonable notice to Employee and an opportunity for Employee, together
with Employee's counsel, to be heard before the Board of Directors,
finding that, in the good faith opinion of the Board, Employee was
guilty of conduct set forth above in clauses (A), (B) or (C) of the
first sentence of this subparagraph and specifying the particulars
thereof in detail.
-3-
4
3. Parachute Payment Limitations. Any other provision of this Agreement
to the contrary notwithstanding, if the total amount of payments and benefits to
be paid or provided to Employee under this Agreement which are considered to be
"parachute payments" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), when added to any other such "parachute
payments" received by Employee from the Company or from a member of the
Company's affiliated group (as provided in Code Section 280G(d)(5)), whether or
not under this Agreement, are in excess of the amount Employee can receive
without causing the Company to lose its deduction with respect to all or any
portion of such total amount on account of Code Section 280G, the amount of
payments and benefits to be paid or provided to Employee under this Agreement
which are parachute payments shall be reduced to the highest amount which will
not cause the Company to lose its deduction with respect to any such payments
and benefits on account of Code Section 280G. In the event that payments or
benefits to be provided under this Agreement are required to be reduced under
this Section, the Company shall notify Employee in writing of the amount of such
reduction (the "Reduction Notice") within 15 business days following Employee's
Termination Date. Employee shall have the right to elect which payments and/or
benefits hereunder shall be reduced within 15 business days following the date
on which Employee receives the Reduction Notice. If no such election is received
by the Company within such 15-business-day period, the reduction shall be made
from such payments or benefits as the Company shall determine in its discretion.
4. Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company to: Petroglyph Energy, Inc.
0000 Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxx 00000
or
Petroglyph Energy, Inc
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxx 00000-0000
If to Employee to: [Address of Employee]
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
5. Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Kansas.
6. Severability. If a court of competent jurisdiction determines that
any provision of this Agreement is invalid or unenforceable, then the invalidity
or unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
-4-
5
8. Withholding of Taxes. The Company may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
9. No Employment Agreement. Nothing in this Agreement shall give
employee any rights (or impose any obligations) to continued employment by the
Company or any subsidiary thereof or successor thereto, nor shall it give the
Company any rights (or impose any obligations) with respect to continued
performance of duties by Employee for the Company or any subsidiary thereof or
successor thereto.
10. Assignment.
(a) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, except
as provided in the remainder of this paragraph 10. Without limiting the
foregoing, Employee's right to receive payments hereunder shall not be
assignable or transferable, whether by pledge, creation of a security
interest or otherwise, other than a transfer by his will or by the laws
of descent or distribution, and in the event of any attempted
assignment or transfer contrary to this paragraph 10 the Company shall
have no liability to pay any amount so attempted to be assigned or
transferred. This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
(b) The Company may: (x) as long as it remains obligated with
respect to this Agreement, cause its obligations hereunder to be
performed by a subsidiary or subsidiaries for which Employee performs
services, in whole or in part; (y) assign this Agreement and its rights
hereunder in whole, but not in part, to any corporation with or into
which it may hereafter merge or consolidate or to which it may transfer
all or substantially all of its assets, if said corporation shall by
operation of law or expressly in writing assume all liabilities of the
Company hereunder as fully as if it has been originally named the
Company herein; but may not otherwise assign this Agreement or its
rights hereunder. Subject to the foregoing, this Agreement shall inure
to the benefit of and be enforceable by the Company's successors and
assigns.
11. Modifications. This Agreement shall not be varied, altered,
modified, canceled, changed or in any way amended except by mutual agreement of
the parties in a written instrument executed by the parties hereto or their
legal representatives.
-5-
6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
PETROGLYPH ENERGY, INC.
By:
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
EMPLOYEE
-------------------------------------------
Name:
-6-
7
EXHIBIT A
Employee Factor
---------------- ------
Xxxxxx X. Xxxxxxx 2.00
Xxxxxx X. Xxxxxxxxxxx 1.75
S. Xxxxxxx Xxxxx 1.75
Xxx X. Xxxxx 1.20
