AMENDED TERMINATION
AGREEMENT
The termination
agreement, dated as of [
] (the “Termination Agreement”), was made and entered
into by and between PetroQuest Energy, Inc., a Delaware corporation
with its principal office at 400 E. Kaliste Saloom Road,
Suite 6000, Lafayette, Louisiana 70508 (the
“Company”), and [
] (“Executive”). The Company and Executive hereby agree
to amend the Termination Agreement effective December 31, 2008
(the “Amended Termination Agreement”), as
follows.
A. The
Termination Agreement sets forth the severance benefits which the
Company agrees that it will pay to the Executive if
Executive’s employment with the Company terminates under one
of the circumstances described therein following a Change in
Control of the Company.
B. The
Company and Executive desire to amend the Termination Agreement to
comply with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended and the rules, notices and
regulations thereunder effective December 31, 2008 (the
“Code”).
NOW, THEREFORE, in
consideration of the foregoing premises and the mutual covenants
contained herein, the parties hereto agree to amend the Termination
Agreement as follows:
1. Term
of Agreement . This Amended Termination Agreement shall be
effective immediately on December 31, 2008 and shall continue
in effect through December 31, 2010; provided, however, that
commencing on January 1, 2011 and each January 1 thereafter,
the term of this Amended Termination Agreement shall automatically
be extended for one additional year unless not later than
September 30 of the preceding year, the Company shall have
given notice that it does not wish to extend this Amended
Termination Agreement; provided, further, that notwithstanding any
such notice by the Company not to extend, this Amended Termination
Agreement shall automatically be extended for 24 months beyond
the term provided herein if a Change in Control, as defined in
Section 3 of this Amended Termination Agreement, has occurred
during the term of this Amended Termination Agreement.
2. Effect
on Employment Rights . This Amended Termination Agreement is
not part of any employment agreement that the Company and Executive
may have entered. Nothing in this Amended Termination Agreement
shall confer upon Executive any right to continue in the employ of
the Company or interfere with or restrict in any way the rights of
the Company, which are hereby expressly reserved, to terminate for
any reason, with or without Cause (as defined below).
Executive agrees
that, subject to the terms and conditions of this Amended
Termination Agreement, in the event of a Potential Change in
Control of the Company (as defined below), Executive will remain in
the employ of the Company during the pendency of any such potential
change in control and for a period of one year after the occurrence
of an actual Change in Control. For this purpose, a
“Potential Change in Control of the Company” shall be
deemed to have occurred if (a) the Company enters into an
agreement the consummation of which would result in the occurrence
of a Change in Control, (b) any person (including the Company)
publicly announces an intention to take or consider taking action
which if consummated would constitute a Change in Control or
(c) the Board of Directors of the Company (the
“Board”) adopts a resolution to the effect that a
potential change in control of the Company has occurred.
3. Change
in Control . For purposes of this Amended Termination
Agreement, a “Change in Control” of the Company shall
be deemed to have occurred if any of the events set forth in any
one of the following paragraphs shall occur:
(a) any
“person” (as defined in section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and as such term is modified in sections 13(d) and
14(d) of the Exchange Act), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding securities under
an employee benefit plan of the Company of any of its subsidiaries,
an underwriter temporarily holding securities pursuant to an
offering of such securities or a corporation owned, directly or
indirectly, by stockholders of the Company in substantially the
same proportions as their ownership of the Company, is or becomes
the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power
of the Company’s then outstanding securities; or
(b) during any
period of not more than two consecutive years, individuals who at
the beginning of much period constitute the Board and any new
director (other than a director designated by a Person who has
entered into an agreement with the Company to effect a transaction
described in clause (a), (c) or (d) of this paragraph)
whose election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or
(c) the
shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary holder of
securities under an employee benefit plan of the Company, at least
50% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no person acquires more than 50% of the
combined voting power of the Company’s then outstanding
securities; or
(d) the
shareholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s
assets.
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Notwithstanding
the foregoing, if any transaction described under paragraphs (a),
(c) and (d) of this Section 3 results in
consideration to the Company or the shareholders of the Company, as
the case may be, from such transaction with a value (as determined
in good faith by the Compensation Committee of the Board) of less
than $1.00 per share (subject to adjustment for stock splits and
combination and stock dividends after the date hereof), no Change
in Control will be deemed to occur unless such transaction is
approved by persons holding not less than two-thirds of the
combined voting power of the Company’s voting securities
entitled to vote on such transaction. In addition, no Change in
Control shall be deemed to occur if there is consummated any
transaction or series of integrated transactions immediately
following which, in the judgment of the Compensation Committee of
the Board, the holders of the Company’s Common Stock
immediately prior to such transaction or series of transactions
continue to have the same proportionate ownership in an entity
which owns all or substantially all of the assets of the Company
immediately prior to such transaction or series of
transactions.
4.
Termination of Employment Following a Change in Control .
Executive shall be entitled to the benefits provided in
Section 5 hereof upon the subsequent termination of
Executive’s employment by the Company within two
(2) years after a Change in Control which occurs during the
term of this Amended Termination Agreement, provided such
termination is (a) by the Company other than for Cause, or
(b) by Executive for Good Reason, as defined below. Executive
shall not be entitled to the benefits of Section 5, any other
provision hereof to the contrary notwithstanding, if
Executive’s employment terminates: (i) pursuant to
Executive retiring at age 65, (ii) by reason of
Executive’s total and permanent disability, or (iii) by
reason of Executive’s death. As used herein, “total and
permanent disability” means a condition which prevents
Executive from performing to a significant degree the essential
duties of his or her position and is expected to be of long-term
duration or result in death. A determination of total and permanent
disability must be based on competent medical evidence.
(i)
Definition . Termination by the Company of Executive’s
employment for “Cause” shall mean termination upon
Executive’s willful engaging in misconduct which is
demonstrably and materially injurious to the Company and its
subsidiaries taken as a whole. No act, or failure to act, on
Executive’s part shall be considered “willful”
unless done, or omitted to be done, by Executive not in good faith
and without reasonable belief that Executive’s action or
omission was in the best interest of the Company or its
subsidiaries. Notwithstanding the foregoing, Executive shall not be
deemed to have been terminated for Cause unless and until there
shall have been delivered to Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three quarters of
the entire membership of the Board at a meeting of the Board called
and held for the purpose of making a determination of whether Cause
for termination exists (after reasonable notice to Executive and an
opportunity for Executive to be heard before the Board), finding
that in the good faith opinion of the Board Executive was guilty of
misconduct as set forth above in this subsection 4(a)(i) and
specifying the particulars thereof in detail.
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(ii) Remedy by
Executive . If the Company gives Executive a Notice of
Termination which states that the basis for terminating
Executive’s employment is Cause, Executive shall have ten
days after receipt of such Notice to remedy the facts and
circumstances which provided Cause. The Board (or any duly
authorized Committee thereof) shall make a good faith reasonable
determination immediately after such ten-day period whether such
facts and circumstances have been remedied and shall communicate
such determination in writing to Executive. If the Board determines
that an adequate remedy has not occurred, then the initial Notice
of Termination shall remain in effect.
(b) Good
Reason . After a Change in Control, Executive may terminate
employment with the Company at any time during the term of this
Amended Termination Agreement if Executive has made a good faith
reasonable determination that Good Reason exists for this
termination.
(i)
Definition . For purposes of this Amended Termination
Agreement, “Good Reason” shall mean any of the
following actions, if taken without the express written consent of
Executive:
A. any material
change by the Company in Executive’s functions, duties, or
responsibilities which change would cause Executive’s
position with the Company to become of less dignity,
responsibility, importance, or scope from the position and
attributes that applied to Executive immediately prior to the
Change in Control;
B. any significant
reduction in Executive’s base salary, other than a reduction
effected as part of an across-the-board reduction affecting all
executive employees of the Company;
C. any material
failure by the Company to comply with any of the provisions of this
Amended Termination Agreement (or of any employment agreement
between the parties);
D. the
Company’s requiring Executive to be based at any office or
location more than 45 miles from the home at which the Executive
resides on the date immediately preceding the Change in Control,
except for travel reasonably required in the performance of
Executive’s responsibilities and commensurate with the amount
of travel required of Executive prior to the Change in Control;
or
E. any failure by
the Company to obtain the express assumption of this Amended
Termination Agreement by any successor or assign of the
Company.
Executive’s
right to terminate employment for Good Reason pursuant to this
subsection 4(b)(i) shall not be affected by Executive’s
incapacity due to physical or mental illness.
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(ii) Remedy by
Company . If Executive gives the Company a Notice of
Termination which states that the basis for Executive’s
termination of employment is Good Reason, the Company shall have
ten days after receipt of such Notice to remedy the facts and
circumstances which provided Good Reason. Executive shall make a
good faith reasonable determination immediately after such ten-day
period whether such facts and circumstances have been remedied and
shall communicate such determination in writing to the Company. If
Executive determines that adequate remedy has not occurred, then
the initial Notice of Termination shall remain in
effect.
(iii)
Determination by Executive Presumed Correct . Any
determination by Executive pursuant to this Section 4(b) that Good
Reason exists for Executive’s termination of employment and
that adequate remedy has not occurred shall be presumed correct and
shall govern unless the party contesting the determination shows by
a clear preponderance of the evidence that it was not a good faith
reasonable determination.
(iv) Severance
Payment Made Notwithstanding Dispute . Notwithstanding any
dispute concerning whether Good Reason exists for termination of
employment or whether adequate remedy has occurred, the Company
shall immediately pay to Executive, as specified in Section 5,
any amounts otherwise due under this Amended Termination
Agreement.
(c) Notice of
Termination . Any termination of Executive’s employment
by the Company or by Executive hereunder shall be communicated by a
Notice of Termination to the other party hereto. For purposes of
this Amended Termination Agreement, a “Notice of
Termination” shall mean a written notice which shall indicate
the specific termination provisions in this Amended Termination
Agreement relied upon any which sets forth (i) in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so
indicated and (ii) the date of Executive’s termination
of employment, which shall be no earlier than 10 days after
such Notice is received by the other party. Any purported
termination of the Executive’s employment by the Company
which is not effected pursuant to a Notice of Termination
satisfying the requirements of this Amended Termination Agreement
shall not be effective. In the case of a term
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