EXHIBIT 10.20
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT, dated as of _______________ is made and
entered into by and between PetroQuest Energy, Inc., a Delaware corporation with
its principal office at 400 E. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Road, Suite 3000, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and _______________ ("Executive").
R E C I T A L S
A. Company desires to enter into an agreement with Executive whereby
severance benefits will be paid to Executive on a change in control of the
Company and consequent actual or constructive termination of Executive's
employment.
B. This 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 herein following a
Change in Control of the Company.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. Term of Agreement. This Agreement shall be effective immediately on the
date hereof and shall continue in effect through December 31, [3rd December
after date of execution]; provided, however, that commencing on January 1, [3rd
January after date of execution] and each January 1 thereafter, the term of this
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 Agreement; provided, further, that
notwithstanding any such notice by the Company not to extend, this 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 Agreement, has occurred
during the term of this Agreement.
2. Effect on Employment Rights. This Agreement is not part of any
employment agreement that the Company and Executive may have entered. Nothing in
this 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.
Executive agrees that, subject to the terms and conditions of this
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 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
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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.
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 years
after a Change in Control which occurs during the term of this Agreement,
provided such termination is (a) by the Company other than for cause, as defined
below, 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 or 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.
(a) Cause.
(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
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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.
(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 Agreement
if Executive has made a good faith reasonable determination that Good
Reason exists for this termination.
(i) Definition. For purposes of this 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 Agreement (or of any employment
agreement between the parties);
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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 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.
(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
Agreement. Executive may be required to repay such amounts to the
Company if any such dispute is finally determined adversely to
Executive.
(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 Agreement,
a "Notice of Termination" shall mean a written notice which shall indicate
the specific termination provisions in this Agreement relied upon any
which sets forth (i) in reasonable detail the facts and circumstances
claimed to provide a basis for
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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 Agreement shall not be effective. In the case of a
termination for Cause, the Notice of Termination shall also satisfy the
requirements set forth in Section 4(a)(i).
5. Severance Payment Upon Termination of Employment. If Executive's
employment with the Company is terminated during the term of this Agreement and
after a Change in Control (a) by the Company other than for Cause, or (b) by
Executive for Good Reason, then Executive shall be entitled to the following:
(a) Lump-Sum Severance Payment. In lieu of any further salary
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum severance
payment, in cash, equal to two (2) (or, if less, the number of years,
including fractions, from the date of Termination until the Executive
would have reached age sixty-five (65)) times the sum of (a) the
Executive's Annual Base Salary in effect on date of termination and (b)
the Executive's most recent Annual Bonus. if the most recent Annual Bonus
was a stock option or a stock grant, the value of the bonus will be deemed
to be the number of option shares times the closing price of the Company's
Common Stock for the 20 trading days prior to Termination.
(b) Continued Benefits. For a twenty-four (24) month period (or, if
less, the number of months from the Date of Termination until the
Executive would have reached age sixty-five (65)) after the Date of
Termination, the Company shall provide the Executive with life insurance,
health, disability and other welfare benefits ("Welfare Benefits")
substantially similar in all respects to those which the Executive is
receiving immediately prior to the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to the Potential
Change in Control preceding the Change in Control or the Change in Control
which reduction constitutes or may constitute God Reason). Benefits
otherwise receivable by an Executive pursuant to this Section shall be
reduced to the extent substantially similar benefits are actually received
by or made available to the Executive by any other employer during the
same time period for which such benefits would be provided pursuant to
this Section at a cost to the Executive that is commensurate with the cost
incurred by the Executive immediately prior to the Executive's Date of
Termination (without giving effect to any increase in costs paid by the
Executive after the Potential Change in Control preceding the Change in
Control or the Change in Control which constitutes or may constitute Good
Reason); provided, however, that if the Executive becomes employed by a
new employer which maintains a medical plan that either (i) does not cover
the Executive or a family member or dependent with respect to a
preexisting condition which was covered under the applicable Company
medical plan, or (ii) does not cover the Executive or a family member or
dependent for a designated waiting
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period, the Executive's coverage under the applicable Company medical plan
shall continue (but shall be limited in the event of noncoverage due to a
preexisting condition, to such preexisting condition) until the earlier of
the end of the applicable period of noncoverage under the new employer's
plan or the second anniversary of the Executive's Date of Termination. The
Executive agrees to report to the Company any coverage and benefits
actually received by the Executive or made available to the Executive from
such other employer(s). The Executive shall be entitled to elect to change
his level of coverage and/or his choice of coverage options (such as
Executive only or family medical coverage) with respect to the Welfare
Benefits to be provided by the Company to the Executive to the same extent
that actively employed senior executives of the Company are permitted to
make such changes; provided, however, that in the event of any such
changes the Executive shall pay the amount of any cost increase that would
actually be paid by an actively employed executive of the Company by
reason of making the same change in his level of coverage or coverage
options.
(c) Gross-Up Payment. In the event that the Executive becomes
entitled to the Severance Benefits or any other benefits or payments under
this Agreement (other than pursuant to this Section) by reason of the
accelerated vesting of stock options thereunder (together, the "Total
Benefits"), and in the event that any of the Total Benefits will be
subject to the Excise Tax, the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax on the Total
Benefits and any federal, state and local income tax, Excise Tax and FICA
and Medicare withholding taxes upon the payment provided for by this
Section, shall be equal to the Total Benefits.
For purposes of determining whether any of the Total Benefits will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by the Executive in
connection with a Change in Control or the Executive's termination of
employment (whether pursuant to the terms of this Agreement or any other
agreement, plan or arrangement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the meaning
of Section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning the Section 280G(b)(1) shall be treated as subject to
the Excise Tax, unless in the opinion of tax counsel ("Tax Counsel")
selected by the Company's independent auditors and acceptable to the
Executive, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of
the Base Amount, or are otherwise not subject to the Excise Tax, (ii) the
amount of the Total Benefits which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of the
Total Benefits reduced by the amount of such Total Benefits that in the
opinion of Tax Counsel are not parachute payments, or (B) the amount of
excess parachute payments within the meaning of Section 280G(b)(1) (after
applying clause (i), above), and (iii) the
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value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be
deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the
Date of Termination, net of the reduction in federal income taxes which
could be obtained from deduction of such state and local taxes (calculated
by assuming that any reduction under Section 68 of the Code in the amount
of itemized deductions allowable to the Executive applies first to reduce
the amount of such state and local income taxes that would otherwise be
deductible by the Executive).
In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the Company, at the time
that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax, federal, state
and local income taxes and FICA and Medicare withholding taxes imposed on the
portion of the Gross-Up Payment being repaid by the Executive to the extent that
such repayment results in a reduction in Excise Tax, FICA and Medicare
withholding taxes and/or federal, state or local income taxes) plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment, determined as previously described, to the
Executive in respect to such excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess) at the time that the
amount of such excess is finally determined.
(d) Timing of Payments. The payments provided for in Sections 5(a)
and 5(c) shall be made not later than the fifth (5th) day following the
Date of Termination; provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good
faith by the Company, of the minimum amount of such payments and shall pay
the remainder of such payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code from the firth (5th) day
following the Date of Termination to the payment of such remainder) as
soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code from the fifth (5th) day following the
Date of Termination to the repayment of such excess).
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6. Reimbursement of Legal Costs. The Company shall pay to the Executive
all legal fees and expenses incurred by the Executive as a result of a
termination which entitles the Executive to any payments under this Agreement
including all such fees and expenses, if any, incurred in contesting or
disputing any Notice of Intent to Terminate under Section 4(a) hereof or in
seeking to obtain or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit provide
hereunder. Such payments shall be made within five (5) business days after
delivery of the Executive's respective written requests for payment accompanied
by such evidence of fees and expenses incurred as the Company reasonably may
require.
7. Damages. Executive shall not be required to mitigate damages with
respect to the amount of any payment provided under this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment provided
under this Agreement be reduced by retirement benefits, deferred compensation or
any compensation earned by Executive as a result of employment by another
employer.
8. Successor to Company. The Company shall require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to Executive, expressly, absolutely
and unconditionally to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession or assignment had taken place. A used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor or
assign to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this Section or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
9. Heirs of Executive. This Agreement shall inure to the benefit of and be
enforceable by Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amounts are still payable to Executive hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legatee, or other
designee or, if there be so much designee, to Executive's estate.
10. Arbitration. Any dispute, controversy or claim arising under or in
connection with this Agreement, or the breach thereof, shall be settled
exclusively by arbitration in accordance with the Rules of the American
Arbitration Association then in effect. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction. Any
arbitration held pursuant to this Section in connection with Executive's
termination of employment shall take place in Houston, Texas at the earliest
possible date. If any proceeding is necessary to enforce or interpret the terms
of this Agreement, or to recover damages for breach thereof, the prevailing
party shall be entitled to reasonable attorneys' fees
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and necessary costs and disbursements, not to exceed in the aggregate one
percent (1%) of the net worth of the other party, in addition to any other
relief to which he or it may be entitled.
11. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered by messenger or in person, or when
mailed by United States registered mail, return receipt requested, postage
prepaid, as follows:
If to the Company: ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
If to the Executive _______________
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
12. General Provisions.
(a) Executive's rights and obligations under this Agreement shall
not be transferable by assignment or otherwise, nor shall Executive's
rights be subject to encumbrance or subject to the claims of the Company's
creditors. Nothing in this Agreement shall prevent the consolidation of
the Company with, or its merger into, any other corporation, or the sale
by the Company of all or substantially all of its properties or assets;
and this Agreement shall inure to the benefit of, be binding upon and be
enforceable by, any successor surviving or resulting corporation, or other
entity to which such assets shall be transferred. This Agreement shall not
be terminated by the voluntary or involuntary dissolution of the Company.
(b) This Agreement and any Employment Agreement with Executive plus
terms of any stock option plans or grants constitutes the entire agreement
between the parties hereto in respect to the rights and obligations of the
parties following a Change in Control. This Agreement supersedes and
replaces all prior oral and written agreements, understandings,
commitments, and practices between the parties (whether or not fully
performed by Executive prior to the date hereof), which shall be of no
further force or effect.
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(c) The provisions of this Agreement shall be regarded as divisible,
and if any of said provisions or any part thereof are declared invalid or
unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts thereof and
the applicability thereof shall not be affected thereby.
(d) This Agreement may not be amended or modified except by a
written instrument executed by the Company and Executive.
(e) This Agreement and the rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of
Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PetroQuest Energy, Inc.,
a Delaware Corporation
By: ____________________________________
Name: __________________________________
Title: _________________________________
________________________________________
Executive
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