Exhibit 10.1
CHANGE-IN-CONTROL SEVERANCE
AGREEMENT
CHANGE IN CONTROL SEVERANCE
AGREEMENT by and between
Intrepid Potash, Inc., a Delaware corporation (the “
Company ”), and
(the “ Executive ”), dated as of the
day of
October, 2008.
RECITAL
The Board of Directors of the
Company (the “ Board ”) has determined that it
is in the best interests of the Company and its stockholders to
assure that the Company will have the continued dedication of the
Executive, notwithstanding the possibility, threat or occurrence of
a Change in Control (as defined below) of the Company. The Board
believes it is imperative to diminish the inevitable distraction of
the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change in Control and to
encourage the Executive’s full attention and dedication to
the Company currently and in the event of any threatened or pending
Change in Control, and to provide the Executive with compensation
and benefits arrangements upon a Change in Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives,
the Board has caused the Company to enter into this
Agreement.
AGREEMENT
NOW, THEREFORE
, it is hereby agreed as
follows:
1. Definitions .
Unless the context or definitions elsewhere in this Agreement
clearly indicate otherwise, the terms below shall be defined as
follows:
a. “ Average Annual
Bonus/STI ” means the average of the annual
bonuses/short-term incentive actually received by the Executive, if
any, for the two (2) most recently completed fiscal years of
the Company. In the event the Executive was employed, as of the
Date of Termination, through only one completed fiscal year of the
Company, the Average Annual Bonus/STI shall be equal to the average
of the bonus/short-term incentive actually received by the
Executive for such completed fiscal year and his target
bonus/short-term incentive in effect as of the Date of Termination.
In the event that Executive was not, as of the Date of Termination,
employed through at least one completed fiscal year of the Company,
Executive’s Average Annual Bonus/STI shall be deemed to be
his target annual bonus/short-term incentive in effect as of the
Date of Termination.
b. “ Cause
” means any one or more of the following events:
(i) conviction of (or pleading
nolo contendere to) a felony;
(ii) engaging in theft, fraud,
embezzlement, or willful misappropriation of the property of the
Company;
(iii) violation of any Company
policy or practice regarding discrimination or harassment that
would be grounds for termination of a Company employee in
general;
(iv) Executive’s willful
failure to perform substantially Executive’s material duties
(other than such failure resulting from incapacity due to physical
or mental illness), which, for avoidance of doubt, shall include
Executive’s insubordination, after (i) a written demand
for corrected performance is delivered to Executive by the Board or
the Company’s Chief Executive Officer that identifies
specifically the manner in which the Board or the Company’s
Chief Executive Officer believes Executive has not performed
substantially Executive’s material duties, and
(ii) Executive fails to cure the matters identified in the
written demand within 30 days. No act or failure to by Executive
shall be deemed “willful” if done, or omitted to be
done, by him in good faith and with the reasonable belief that his
action or omission was in the best interest of the
Company.
c. “ Change in
Control ” means:
(i) the acquisition by any
individual, entity, or group (within the meaning of Sections
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “ Exchange Act ”)) (a “
Person ”) of “beneficial ownership”
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of more than 30% of the combined voting power of the
Company’s then outstanding securities entitled to vote
generally in the election of directors, other than any acquisition
(1) directly from, or by, the Company, (2) by a trustee
or other fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, or (3) by
Robert P. Jornayvaz III, Hugh E. Harvey Jr. or J. Landis Martin
(collectively the “ Principals ”), or by any
“group” (within the meaning of Section 13(d)(3) of
the Exchange Act) that is controlled by one or more of the
Principals; or
(ii) the individual directors of the
Board as of the Effective Date (the “ Incumbent
Directors ”) cease to constitute at least two-thirds of
the Board; provided, however, that for purposes of this paragraph,
any new director whose election by the Board or nomination for
election by the Company’s stockholders was approved by a vote
of at least a majority of the Incumbent Directors shall be
considered an Incumbent Director; or
(iii) consummation, in one
transaction or a series or related transactions, of a
reorganization, merger, or consolidation of the Company or sale or
other disposition, direct or indirect, of all or substantially all
of the assets of the Company (a “ Business Combination
”), in each case, unless, following such Business
Combination, the Persons who were the “beneficial
owners” of outstanding voting securities of the Company
immediately prior to such Business Combination “beneficially
own,” by reason of such ownership of the Company’s
voting securities immediately before the Business Combination, more
than 30%
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of the combined voting power of the
company resulting from such Business Combination (including,
without limitation, a company which as a result of such transaction
owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership of the
outstanding voting securities of the Company immediately prior to
such Business Combination; or
(iv) approval by those Persons
holding the voting securities of the Company of a complete
liquidation or dissolution of the Company.
A Person will not be deemed to be a
member of a “group” for purposes of this definition
solely by virtue of becoming party to an agreement with one or more
Principals that requires such Person to vote the voting stock of
the Company in a manner specified by the Principals. In no event
shall the sale of the Company’s common stock to the public by
the Company or the Principals pursuant to a registration statement
filed with the Securities and Exchange Commission constitute a
Change in Control for purposes of this Agreement.
d. “ Code
” means the Internal Revenue Code of 1986, as it may be
amended or revised from time to time.
e. “ Date of
Termination ” means the date Executive terminates
employment with the Company.
f. “ Disability
” means any physical or mental condition which prevents
Executive, for a period of 90 consecutive days, from performing and
carrying out Executive’s material duties and responsibilities
with the Company, as determined by the Board.
g. “ Involuntary
Termination ” means:
(i) Executive’s employment is
terminated by the Company for any reason other than for Cause,
death, or Disability; or
(ii) Executive resigns as a result
of any of the following events or conditions which remain in effect
for at least thirty (30) days after notice has been provided
by Executive to the Company of the existence of such event or
condition: (A) a reduction in Executive’s base salary or
annual bonus opportunity; (B) a material diminution in
Executive’s responsibility or authority; (C) a change of
more than 30 miles in the location at which Executive primarily
performs his services; or (D) any material failure by the
Company to comply with any material term of this Agreement.
Executive shall notify the Company of such event or condition
within ninety (90) days of the initial existence of the event
or condition.
It is the intent of the Company that
a termination pursuant to this subparagraph 2f. shall meet the
definition of “involuntary separation” set forth in
Treasury Regulation Section 1.409A-1(n), and this Agreement
shall be interpreted accordingly.
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h. “ Termination
Protection Period ” means the period of time
commencing on the date of a Change in Control and ending
twenty-four (24) months after the date of such Change in
Control.
2. Term . The term of
this Agreement shall extend from the Effective Date hereof until
the sooner of (a) the expiration of the Termination Protection
Period, (b) the Executive’s Date of Termination, except
in the case of a Qualified Termination (as defined in subparagraph
3a., below), or (c) the date on which the parties agree in
writing to terminate this Agreement.
3. Change in Control
Benefits .
a. Severance Payment and
Benefits . In the event of an Involuntary Termination of
Executive’s employment within the Termination Protection
Period (a “ Qualified Termination ”), Executive
shall be entitled to the following payments and
benefits:
(i) Cash Payments. The
Company shall pay to the Executive in a lump sum in cash the
aggregate of the following amounts:
(1) an amount equal to the sum of
(x) any base salary earned but not yet paid to Executive
through the Date of Termination, (B) any bonus/short-term
incentive earned and payable in accordance with the terms of any
applicable Company bonus/short-term incentive plan but not yet paid
to Executive as of the date of termination, and (C) any other
compensation earned through the date of termination but not yet
paid to Executive (the “ Accrued Obligations
”);
(2) an amount equal to the product
of (x) two (2) and (y) the sum of (i) the
Executive’s annual base salary in effect on the Date of
Termination (which shall, in all events, be deemed to be at least
as much as the Executive’s annual base salary in effect as of
the Change of Control), and (ii) the Executive’s Average
Annual Bonus/STI; and
(3) an amount equal to the product
of (x) the Executive’s target annual bonus/short-term
incentive for the fiscal year in which the Date of Termination
occurs, and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365.
Except as may be required by
subparagraph 3c., below, payment shall be made as soon as
reasonably practicable following the Date of Termination, but in
all events within thirty (30) days thereof.
(ii) Health and Welfare
Continuation . For two (2) years after the
Executive’s Date of Termination, the Company shall provide,
free of charge, health and welfare benefits to the Executive and/or
the Executive’s family which are at least equal to the
benefits which would have been provided in accordance with the
plans, programs, practices and policies in existence as of the
Executive’s Date of Termination or, if more favorable to the
Executive, as in effect generally
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at any time thereafter with respect
to other peer executives of the Company and their families,
provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive health and welfare
benefits under another employer provided plan, program, or
arrangement, the health and welfare benefits described herein shall
be discontinued effective immediately upon Executive’s
eligibility for such other coverage. It is the intent of the
parties that, to the maximum extent permitted, the continued health
and welfare benefits provided pursuant to this subparagraph shall
be exempt from the application of Code Section 409A pursuant
to Treasury Regulation
Section 1.409A-1(b)(9)(v)(B).
(iii) Outplacement Services .
The Company shall, at its sole expense as incurred, provide the
Executive with up to $5,000 of individual outplacement services
during the one (1) year period following the Date of
Termination. The scope and provider of such services shall be
selected by the Executive. It is the intention of the parties that
the outplacement services provided pursuant to this subparagraph be
exempt from the application of Code Section 409A pursuant to
Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
b. Equity Acceleration
. All equity incentive awards made under the Intrepid Potash, Inc.
2008 Equity Incentive Plan and under any other equity incentive
plans sponsored or maintained by the Company shall vest in full
immediately prior to the occurrence of a Change in
Control.
c. 409A Payment and Ordering
Rules . Payments under this paragraph 3 are intended to
qualify to the maximum extent possible as “short-term
deferrals” exempt from the application of Code
Section 409A. Any payments that do not so qualify are intended
to qualify for the Code Section 409A exemption set forth in
Treasury Regulation Section 1.409A-1(b)(9)(iii) (which exempts
from Code Section 409A certain payments made upon an
“involuntary separation from service”). To the extent
that payments made pursuant to this paragraph 3 are made upon an
“involuntary separation from service” but exceed the
exemption threshold set forth in Treasury Regulation
Section 1.409A-1(b)(9)(iii), the exemption will first be
applied to any continued health and welfare benefits payable under
this paragraph 3 (to the extent such benefits are subject to Code
Section 409A and are payable within six (6) months from
the Executive’s “separation from service,” as
defined for purposes of Code Section 409A (the “
Delayed Payment Date ”)) and thereafter to the cash
payments that are payable closest in time to the date of
termination, until the exemption has been applied in full. Any
payments under this paragraph 3 that are not exempted from Code
Section 409A and that are payable prior to the Delayed Payment
Date shall be withheld by the Company and paid to Executive on the
Delayed Payment Date or as soon thereafter as is administratively
feasible. For purposes of this paragraph, any payment or benefit to
be made in installments or periodically shall be deemed a series of
separate payments pursuant to Treasury Regulation
Section 1.409A-2(b)(2)(iii). Nothing in this paragraph shall
prohibit the Company and Executive from making use of any other
Code Section 409A exemption that may be applicable to a
payment or benefit hereunder.
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4. Non-Exclusivity of
Rights . Excepted as specifically provided otherwise
herein, nothing in this Agreement shall prevent or limit
Executive’s continuing or future participation in any plan,
program, practice, or policy provided by the Company for which
Executive is qualified or may qualify, nor shall anything in this
Agreement limit or otherwise affect such rights as Executive may
have under any employee equity incentive, 401(k) plan, deferred
compensation plan, health or life insurance plans, or other
employee benefit plan of the Company. Except as explicitly modified
by this Agreement, benefits which are vested or which Executive is
otherwise entitled to receive under any plan, policy, practice, or
program, or pursuant to any contract or agreement with the Company
shall be payable in accordance with such plan, policy, practice,
program, contract, or agreement.
5. Full Settlement .
Except as s
