Exhibit 10.1
SEVERANCE
AGREEMENT
This Severance Agreement
between Edge Petroleum Corporation , a Delaware corporation
(the “Company”), and Gary L. Pittman
(“Employee”).
WITNESSETH:
WHEREAS , the Company desires to retain certain employee
personnel and, accordingly, the Board of Directors of the Company
(the “Board” ) approved the Company entering
into a severance agreement with Employee in order to encourage such
employee’s continued service to the Company; and
WHEREAS , Employee is prepared to commit such services
in return for specific arrangements with respect to severance
compensation and other benefits; and
WHEREAS , in consideration for Employee’s
agreement to enter into this Severance Agreement, the Company will,
upon the occurrence of a Change of Control (as defined in
Section 1(b) of this Agreement), automatically vest any
Restricted Stock Award that is outstanding as of the date of such
Change of Control; and
WHEREAS , effective immediately, the Company and
Employee desire to establish documentary compliance with
Section 409A of the Internal Revenue Code of 1986, as
amended;
NOW THEREFORE
, in consideration of the foregoing
and for other good and valuable consideration, the Company and
Employee agree as follows:
1.
Definitions
(a)
“Change in
Duties” shall mean
the occurrence, within two years after the date upon which a Change
of Control occurs, of any one or more of the following conditions
provided that the Employee has notified the Company of the
existence of such condition within 90 days of its initial existence
and the Company has not cured the condition within 30 days after
such notice is provided (the “Correction
Period”):
(i)
A significant reduction in the
duties of Employee from those applicable to the Employee
immediately prior to the date on which a Change of Control occurs;
or
(ii)
A material reduction in
Employee’s annual salary from that provided to the Employee
immediately prior to the date on which a Change of Control occurs;
or
(iii)
A change in the location of
Employee’s principal place of employment by the Company by
more than 50 miles from the location where he or she was
principally employed immediately
prior to the date on which a Change of Control occurs.
(b)
“Change of
Control” means the
occurrence of either of the following events:
(i)
The Company (A) shall not be
the surviving entity in any merger, consolidation or other
reorganization (or survives only as a subsidiary of an entity other
than a previously wholly-owned subsidiary of the Company) or
(B) is to be dissolved and liquidated, and as a result of or
in connection with such transaction which for the avoidance of
doubt, applies to (A) and (B), the persons who were directors
of the Company before such transaction shall cease to constitute a
majority of the Board;
(ii)
Any person or entity, including a
“group” as contemplated by
Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of 20% or more of the
outstanding shares of the Company’s voting stock (based upon
voting power), and as a result of or in connection with such
transaction, the persons who were directors of the Company before
such transaction shall cease to constitute a majority of the Board;
or
(iii)
The Company sells all or
substantially all of the assets of the Company to any other person
or entity (other than a wholly-owned subsidiary of the Company) in
a transaction that requires shareholder approval pursuant to the
Texas Business Corporation Act.
(c)
“Code”
shall mean the Internal Revenue Code
of 1986, as amended.
(d)
“Compensation”
shall mean the greater
of:
(i)
Employee’s current annual
salary plus his or her Targeted Bonus Opportunity immediately prior
to the date on which a Change of Control occurs, or
(ii)
Employee’s current annual
salary plus his or her Targeted Bonus Opportunity at the time of
his or her Involuntary Termination.
(e)
“Incentive
Award” shall mean
any grant or award of restricted stock, stock options or other
benefits or awards made to an Employee under the Incentive Award
Plan.
(f)
“Incentive Award
Plan” shall mean
Edge Petroleum Corporation 1997 Incentive Plan, as amended, or any
successor thereto.
(g)
“Involuntary
Termination” shall
mean any termination of Employee’s employment with the
Company which:
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(i)
does not result from a resignation
by Employee (other than a resignation pursuant to Clause
(ii) of this paragraph (g) or a resignation at the
request of the Company); or
(ii)
results from a resignation by
Employee on or before the date which is thirty days after the
expiration of the Correction Period associated with a Change in
Duties; provided, however, the term “Involuntary
Termination” shall not include a Termination for Cause
or any termination as a result of death, disability under
circumstances entitling him to benefits under the Company’s
long-term disability plan.
(h)
“Severance
Amount” shall mean
an amount equal to 2.0 times Employee’s
Compensation.
(i)
“Targeted Bonus
Opportunity ” shall
mean the Employee’s current targeted bonus opportunity, if
any, as approved by the Compensation Committee effective for the
year with respect to which such targeted bonus opportunity, if any,
is being determined or for the last year for which such an
opportunity was so approved if one has not been approved for the
current year, expressed as a dollar amount.
(j )
“Termination for
Cause” shall mean
termination of Employee’s employment by the Company (or its
subsidiaries) by reason of (a) conviction of the Employee by a
court of competent jurisdiction of any felony or a crime involving
moral turpitude; (b) the Employee’s knowing failure or
refusal to follow reasonable instructions of the Board or
reasonable policies, standards and regulations of the Company or
its subsidiaries as set forth in the employee manual or otherwise;
(c) the Employee’s continued failure or refusal to
faithfully and diligently perform the usual, customary duties of
his or her employment with the Company or a subsidiary;
(d) the Employee continuously conducting himself or herself in
an unprofessional, unethical, immoral or fraudulent manner; or
(e) the Employee’s conduct discredits the Company or a
subsidiary or is detrimental to the reputation, character and
standing of the Company or a subsidiary.
2.
Services.
Employee agrees that he or
she will render services to the Company (as well as any subsidiary
thereof or successor thereto) during the period of his or her
employment to the best of his or her ability and in a prudent and
businesslike manner.
3.
Severance
Benefits. If Employee’s employment by the Company
or any subsidiary thereof or successor thereto shall be subject to
an Involuntary Termination which occurs within two years after the
date upon which a Change of Control occurs, then Employee shall be
entitled to receive, as additional compensation for services
rendered to the Company (including its subsidiaries), the following
severance benefits:
(a)
A lump sum cash payment in an amount
equal to Employee’s Severance Amount.
(b)
Effective as of the date of
Involuntary Termination, Employee shall become fully vested in all
outstanding Incentive Awards that had not previously vested
or
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otherwise become exercisable as of
such date due to restrictions or other provisions contained in the
document granting such Incentive Award, such restrictions or other
provisions in such document notwithstanding.
(c)
Employee and, if applicable, his or
her eligible dependents who are covered under the Company’s
medical, dental or vision plans (collectively, the “Company
Group Health Plans”) as of the date on which Employee’s
Involuntary Termination occurs shall be entitled to elect to
continue coverage under the Company Group Health Plans in
accordance with section 4980B of the Code and sections 601-607
et seq . of the Employee Retirement Income Security
Act of 1974, as amended (“COBRA”), or similar
provisions of applicable state continuation coverage laws. If
and to the extent that Employee and/or his or her eligible
dependents elect COBRA coverage then, during the Continuation
Period (defined below), Employee and, if applicable, his or her
covered dependents shall be required to pay the active employee
rates applicable to similarly situated active employees for the
applicable type and level of coverage under the applicable Company
Group Health Plans (the “Employee Contribution”) and
the Company shall pay the remainder of any required premium for the
Continuation Period. For purposes of this Agreement, the
“Continuation Period” shall be the period commencing on
the date of Employee’s Involuntary Termination and ending on
the earliest to occur of (i) the expiration of eighteen months
after Employee’s Involuntary Termination (or any additional
period required pursuant to applicable federal or state law),
(ii) the date Employee or, if applicable, his or her covered
dependents, is eligible for medical, dental or vision coverage, as
applicable, under another employer-provided group health plan (with
Employee being obligated hereunder to report such eligibility to
the Company within 30 days and certify eligibility for payments
hereunder promptly upon request of the Company), or (iii) the
date on which COBRA coverage (or applicable state continuation
coverage, if applicable) terminates. The amount and due dates
for such payment shall be communicated to Employee and, if
applicable, his or her eligible dependents within 44 days of the
date of Employee’s Involuntary Termination. The
foregoing is intended to reflect financial agreements between
Employee and the Company and shall not be construed to limit
Employee’s rights under COBRA. The Continuation Period
shall run concurrently with the required COBRA continuation
coverage period (and any period of state continuation coverage
required by applicable law) and shall not extend any person’s
COBRA continuation coverage period (or period of state continuation
coverage).
(d)
If the Continuation Period expires
pursuant to Section 3(c)(i) above, then following the
expiration of the Continuation Period, if and to the extent that
Employee, and, where applicable, Employee’s covered
dependents were covered by the Company Group Health Plans
immediately prior to termination of the Continuation Period and are
not eligible for medical, dental or vision coverage, as applicable,
under another employer-provided group health plan, Employee shall
be entitled to receive a cash lump sum payment equal to eighteen
times the monthly amount, if any, that the Company or its successor
(or any parent or
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