Exhibit 10.1
SEVERANCE AGREEMENT
     This Severance Agreement (this “Agreement”) is entered into effective as of
the 19th day of October, 2010 (the “Effective Date”), by and between Delta
Petroleum Corporation (“Delta” or the “Company”) and John R. Wallace
(“Wallace”). As used herein, “Parties” means, collectively, Delta and Wallace,
and “Party” means either Delta or Wallace.
RECITALS
     WHEREAS, Delta and Wallace are parties to that certain Employment Agreement
dated May 5, 2005 (the “Employment Agreement”), that certain Change-In-Control
Executive
Severance Agreement dated April 30, 2007 (the “Change-In-Control Agreement”),
and various stock option agreements, stock rights and other stock arrangements
(the “Stock Agreements”); and
     WHEREAS, Delta and Wallace agree that as of the close of business on
July 6, 2010 (the “Separation Date”), Wallace resigned from his positions as
director, officer, and employee of Delta and any of its subsidiaries, including
his positions of President and Chief Operating Officer; and
     WHEREAS, in consideration for Wallace relinquishing all his rights in, to,
and under the Employment Agreement, the Change-In-Control Agreement (except as
set forth below), the Stock Agreements, all amounts relating to past and pending
transactions benefiting Delta (except as expressly provided below) and any other
interests he might claim arising from his efforts as President and/or Chief
Operating Officer, Delta desires to provide the payment and other consideration
specified herein.
     NOW, THEREFORE, in consideration of the provisions herein, and other good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged by Delta and Wallace agree as follows:
1. Resignation. Effective as of the close of business on the Separation Date,
Wallace resigned, and Delta accepted such resignation, from all his positions as
director, officer and employee of Delta and any of its subsidiaries, including
his positions of President and Chief Operating Office.
2. Consideration. If Wallace executes this Agreement on or before October 20,
2010, Delta agrees to pay Wallace one million, six hundred thousand dollars
($1,600,000), less applicable deductions and withholdings (the “Cash
Consideration”). The Cash Consideration shall be payable by Delta to Wallace on
October 29, 2010 by wire transfer in immediately available funds, provided that
Wallace has not revoked this Agreement pursuant to Section 9(g) hereof.
3. Benefits. Delta shall maintain continued group health plan coverage following
the Separation Date under all plans subject to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”) (as codified in Code
Section 4980B and Part 6 of Subtitle B of Title I of ERISA) for Wallace and his
dependents for the maximum period for which such qualified beneficiaries are
eligible to receive COBRA coverage, provided that Wallace timely

 

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elects such COBRA coverage. However, Wallace (and his dependents) shall not be
required to pay more for such COBRA coverage than is charged by Delta to its
officers who are currently in active service for Delta and receiving coverage
under such plan and, therefore, Delta shall be responsible for the difference
between the amount charged hereunder and the full COBRA premiums. In all other
respects, Wallace (and his dependents) shall be treated the same as other COBRA
qualified beneficiaries under the terms of such plans and the provisions of
COBRA. In the event of any change to a group health plan following the
Separation Date, Wallace and his dependents, as applicable, shall be treated
consistently with the current officers of Delta with respect to the terms and
conditions of coverage and other substantive provisions of the plan. Wallace
hereby agrees to acquire and maintain any and all coverage that he is entitled
to at any time during his life under the Medicare program or any similar program
of the United States or any agency thereof. Wallace further agrees to pay any
required premiums for Medicare coverage from his personal funds.
4. Transition Assistance. To facilitate an orderly transition, Wallace agrees to
make himself reasonably available to answer questions and assist in transitional
matters. It is the intent of both Wallace and Delta that Wallace’s employment
with Delta and its subsidiaries shall terminate as of the Separation Date, and
that the transition assistance shall not constitute a continuation of his
employment.
5. Other Business and Activities. From and after the Effective Date, and
notwithstanding the consulting services to be provided hereunder, Wallace shall
be free to pursue any other business and activities in any industry, including
the oil, gas and minerals industry, whether or not competitive with Delta. It is
expressly acknowledged and agreed that Wallace shall hereafter have no duty to
present any potential transactions to Delta or to disclose any other business
information to which he may be privy. Without limiting the foregoing, and for
purposes of clarification, it is acknowledged and agreed that Sections 9 and 10
of the Change-In-Control Agreement and 15 and 16 of the Employment Agreement
shall be null, void and of no effect.
6. Wallace’s Relinquishment of Rights. It is expressly acknowledged and agreed
that, subject to the actual receipt by Wallace of the consideration to be
delivered pursuant to Section 2 above, Wallace shall relinquish all rights he
may have under Section 3 of the Change-In-Control Agreement, Sections 1, 2, 3,
4, 5, 6, 7, and 8 of the Employment Agreement, all rights under the Stock
Agreements (provided that Wallace shall retain any and all shares of Delta that
are fully vested, and issued and outstanding in his name and the name of any of
the members of his family) and, except as set forth in Section 8(c), any and all
rights he may have to any other salary, bonus or other compensation (which shall
be deemed to have been paid to Wallace for all purposes). In the event there is
no actual receipt by Wallace of the consideration to be delivered pursuant to
Section 2 above, then Wallace shall not have relinquished any such rights.
Notwithstanding the foregoing, in the event that a “Change-in-Control”, as
defined in the Change-In-Control Agreement, occurs within the six (6) month
period immediately following the Separation Date, then Wallace’s rights under
Section 3 of the Change-In-Control Agreement shall be reinstated, provided, that
the amounts payable thereunder shall be offset by the amounts paid under this
Agreement so as to be consistent with the provisions of Section 6(c) of the
Employment Agreement.

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7. Acknowledgement of Continuing Rights and Obligations. It is acknowledged and
agreed that, except as provided in Section 6 above, Wallace shall continue to be
entitled to his rights under the Employment Agreement (including without
limitation those contained in Sections 9 and 26) and the Change-In-Control
Agreement (including without limitation those contained in Sections 14, 15, 16,
17 and 21). It is further acknowledged and agreed that Wallace shall continue to
remain obligated under the following Sections of the Employment Agreement:
Sections 10 (insofar as it applies to the surviving Sections of the Employment
Agreement referenced in this Section 7), 11, 12, 14, 17, 18 (insofar as it
applies to the surviving Sections of the Employment Agreement referenced in this
Section 7), and 19 (insofar as it applies to the surviving Sections of the
Employment Agreement referenced in this Section 7). It is further acknowledged
and agreed that Wallace shall continue to remain obligated under the following
Sections of the Change-In-Control Agreement: Sections 5, 6, 8, 11, 12 (insofar
as it applies to the surviving Sections of the Change-In-Control Agreement
referenced in this Section 7), and 13 (insofar as it applies to the surviving
Sections of the Change-In-Control Agreement referenced in this Section 7).
8. General Release.
     (a) Wallace, for himself, and Delta, for itself, and each Party for his or
its respective affiliates, successors, heirs, subrogees, assigns, principals,
agents, partners, employees, associates, attorneys and representatives,
voluntarily, knowingly and intentionally releases and discharges the other Party
and his or its respective predecessors, successors, parents, subsidiaries,
affiliates and assigns and each of its respective officers, directors,
principals, shareholders, agents, attorneys, board members, and employees from
any and all claims, actions, liabilities, demands, rights, damages, costs,
expenses, and attorneys’ fees (including but not limited to any claim of
entitlement for attorneys’ fees under any contract, statute, or rule of law
allowing a prevailing party or plaintiff to recover attorneys’ fees), of every
kind and description from the date Delta hired Wallace through the Effective
Date, except as set forth in subparagraphs (b) and (c) below (the “Released
Claims”).
     (b) The Released Claims include but are not limited to those which arise
out of, relate to, or are based upon: (i) Wallace’s employment with Delta or the
termination thereof; (ii) statements, acts or omissions by the Parties whether
in their individual or representative capacities, (iii) express or implied
agreements between the Parties and claims under any severance plan, except as
provided in this Agreement, (iv) any stock or stock option grant, agreement, or
plan, except as provided in this Agreement, (v) all federal, state, and
municipal statutes, ordinances, and regulations, including, but not limited to,
claims of discrimination based on race, color, national origin, age, sex, sexual
orientation, religion, disability, veteran status, whistleblower status, public
policy, or any other characteristic of Wallace under the Age Discrimination in
Employment Act, the Older Workers Benefit Protection Act, the Americans with
Disabilities Act, the Equal Pay Act, Title VII of the Civil Rights Act of 1964
(as amended), the Employee Retirement Income Security Act of 1974, the
Rehabilitation Act of 1973, the Worker Adjustment and Retraining Notification
Act, or any other federal, state, or municipal law prohibiting discrimination or
termination for any reason, (vi) state and federal common law, including but not
limited to claims for breach of contract, defamation, or emotional distress, and
(vii) any claim which was or could have been raised; provided, notwithstanding
anything to the contrary in this Agreement, the “Released Claims” shall not
include rights under COBRA or any

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401(k) plan. The Parties agree that the Released Claims do not include matters
arising out of or in connection with claims by governmental authorities or
self-regulatory organizations involving actual or potential violations of the
securities laws, rules or regulations applicable to Delta. The Parties further
agree that the Released Claims do not include the Parties’ respective rights and
obligations under this Agreement.
     (c) The Parties specifically agree that, notwithstanding anything herein to
the contrary, nothing in this Agreement alters, modifies or amends Wallace’s
rights to indemnification as set out in Delta’s Certificate of Incorporation, as
amended, or Amended and Restated Bylaws or the Delaware General Corporation Law.
It is also specifically agreed that nothing in this Agreement is intended to
affect Wallace’s rights with respect to royalties, overriding royalty interests,
working interests or any similar oil, gas or mineral interests he owns or
hereinafter acquires. Further, in the event that a “Change-in-Control”, as
defined in the Change-In-Control Agreement, occurs within the six (6) month
period immediately following the Separation Date, then Wallace’s rights under
Section 3 of the Change-In-Control Agreement shall be reinstated as contemplated
by Section 6 above.
9. Representations and Warranties. Each of Wallace and Delta (except as to
subparagraphs (c), (e), (f) and (g) below), severally and not jointly, warrants
and represents as follows:
     (a) He or it has read this Agreement and agrees to the conditions and
obligations set forth in it.
     (b) He or it voluntarily executes this Agreement (i) after having been
advised to consult with legal counsel, (ii) after having had opportunity to
consult with legal counsel and (iii) without being pressured or influenced by
any statement, representation or omission of any person acting on behalf of the
other Party or any of its officers, directors, employees, agents, and attorneys.
     (c) Wallace has no knowledge of the existence of any lawsuit, charge or
proceeding against Delta or any of its officers, directors, employees or agents
arising out of or otherwise connected with any of the matters herein released.
     (d) He or it has the individual, corporate, or entity power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and, if such Party is a corporation, limited liability company or partnership,
the execution, delivery, and performance of this Agreement has been duly
authorized by all necessary corporate, company or partnership action. This
Agreement constitutes the legal, valid, and binding obligation of each Party.
     (e) Wallace admits, acknowledges, and agrees that, other than the
consideration set forth in Section 2 of this Agreement, Wallace has been fully
paid or provided all wages, compensation, salary, commissions, bonuses, expense
reimbursements, stock, stock options, vacation, change-in-control benefits,
severance benefits, deferred compensation, or other benefits from Delta, which
are or could be due to Wallace under the terms of Wallace’s employment or
otherwise.
     (f) Wallace has had at least 21 days to consider this Agreement.

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     (g) Wallace understands that this Agreement waives and releases any claims
Wallace may have under the Age Discrimination in Employment Act. Wallace may
revoke this Agreement for 7 calendar days following its execution, and this
Agreement shall not become enforceable and effective against Wallace until 7
calendar days after such execution. If Wallace chooses to revoke this Agreement,
Wallace must provide written notice to Delta within 7 calendar days of Wallace’s
execution of this Agreement. If Wallace does not revoke within the 7-day period,
the right to revoke is lost.
10. Non-Disparagement.
     (a) Wallace agrees not to make to any person any statement that disparages
the Company or its directors, officers, employees, shareholders or affiliates or
reflects negatively upon the Company, including, without limitation, statements
regarding the Company’s financial condition, business practices, employment
practices, or its predecessors, successors, subsidiaries, officers, directors,
employees, shareholders or affiliates.
     (b) Delta agrees not to make to any person any statement that disparages
Wallace or reflects negatively upon Wallace, including, without limitation,
statements regarding Wallace’s financial condition, business practices,
performance while at Delta or otherwise.
11. Non-Solicitation. For a period of one (1) year following the Effective Date,
Wallace shall not, directly or indirectly through another person or entity,
except on behalf of the Company or an affiliate of the Company:
     (a) induce or attempt to induce any employees of the Company or any
affiliate of the Company to leave the employ of the Company or such affiliate,
or in any way interfere with the relationship between the Company (or such
affiliate) and its employees; or
     (b) solicit any person who is or was an employee or consultant of the
Company or any affiliate of the Company until three (3) months after such
individual’s employment or consulting relationship with the Company or such
affiliate has been terminated.
12. Mandatory Arbitration. Except as provided in subsection (h) of this
Section 12, any dispute must be resolved by binding arbitration in accordance
with the following:
     (a) Either Party may begin arbitration by filing a demand for arbitration
in accordance with the Rules for Commercial Arbitration of the American
Arbitration Association (as in effect at the time of arbitration of a dispute,
the “Arbitration Rules”) and concurrently notifying the other Party of that
demand. If the Parties are unable to agree upon a panel of three arbitrators
within ten (10) days after the demand for arbitration was filed (and do not
agree to an extension of that ten-day period), either Party may request the
Denver office of the American Arbitration Association (“AAA”) to appoint the
arbitrator or arbitrators necessary to complete the panel in accordance with the
Arbitration Rules. Each arbitrator so appointed shall be deemed accepted by the
Parties as part of the panel.
     (b) The arbitration shall be conducted in the Denver, Colorado metropolitan
area at a place and time agreed upon by the Parties with the panel, or if the
Parties cannot agree, as designated by the panel. The panel may, however, call
and conduct hearings and meetings at

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such other places as the Parties may agree or as the panel may, on the motion of
one Party, determine to be necessary to obtain significant testimony or
evidence.
     (c) The panel may authorize any and all forms of discovery upon a Party’s
showing of need that the requested discovery is likely to lead to material
evidence needed to resolve the dispute and is not excessive in scope, timing, or
cost.
     (d) The arbitration shall be subject to the Federal Arbitration Act and
conducted in accordance with the Arbitration Rules to the extent that they do
not conflict with this Section 12. The Parties and the panel may, however, agree
to vary to provisions of this Section 12 or the matters otherwise governed by
the Arbitration Rules.
     (e) The arbitration hearing shall be held within 60 days after the
appointment of the panel. The panel’s final decision or award shall be made
within 30 days after the hearing. That final decision or award shall be made by
unanimous or majority vote or consent of the arbitrators constituting the panel,
and shall be deemed issued at the place of arbitration. The panel’s final
decision or award shall be based on this Agreement and applicable law.
     (f) The panel’s final decision or award may include injunctive relief in
response to any actual or impending breach of this Agreement or any other actual
or impending action or omission of a Party under or in connection with this
Agreement.
     (g) The panel’s final decision or award shall be final and binding upon the
Parties, and judgment upon that decision or award may be entered in any court
having jurisdiction. The Parties waive any right to apply or appeal to any court
for relief from the preceding sentence or from any decision of the panel made
before the final decision or award.
     (h) Nothing in this Section 12 limits the right of either Party to apply to
a court having jurisdiction to (i) enforce the agreement to arbitrate in
accordance with this Section 12, (ii) seek provisional or temporary injunctive
relief, in response to an actual or impending breach of the Agreement or
otherwise so as to avoid an irreparable damage or maintain the status quo, until
a final arbitration decision or award is rendered or the dispute is otherwise
resolved, or (iii) challenge or vacate any final arbitration decision or award
that does not comply with this Section 12. In addition, nothing in this
Section 12 prohibits the Parties from resolving any dispute (in whole or in
part) by agreement.
     (i) The panel may proceed to an award notwithstanding the failure of any
Party to participate in such proceedings. The prevailing Party in the
arbitration proceeding may be entitled to an award of reasonable attorneys’ fees
incurred in connection with the arbitration in such amount, if any, as
determined by the panel in its discretion. The costs of the arbitration shall be
borne equally by the Parties unless otherwise determined by the panel in its
award.
     (j) The panel shall be empowered to impose sanctions and to take such other
actions as it deems necessary to the same extent a judge could impose sanctions
or take such other actions pursuant to the Federal Rules of Civil Procedure and
applicable law. Each party agrees to keep all disputes and arbitration
proceedings strictly confidential except for disclosure of information required
by applicable law which cannot be waived.

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     (k) This Section 12 shall not preclude the Parties at any time from
mutually agreeing to pursue non-binding mediation of the dispute.
13. Section 409A. If Wallace or Delta has determined or in the event that
Wallace or Delta determines that any payment or distribution of any type to
Wallace or for Wallace’s benefit, whether paid or payable or distributed or
distributable, pursuant to the terms of this Agreement, the Employment
Agreement, the Change in Control Agreement or the Stock Agreements (the “Total
Payments”), would be subject to the additional tax and interest imposed by
Section 409A, or any interest or penalties with respect to such additional tax
(such additional tax, together with any such interest or penalties, are
collectively referred to as the “409A Tax”), Wallace acknowledges that any and
all claims related to such 409A Tax constitute Released Claims.
14. Company’s Successor. In addition to any obligations imposed by law upon any
successor to Delta, Delta shall require any successor to all or substantially
all of Delta’s business or assets (whether direct or indirect and whether by
purchase, reorganization, merger, share exchange, consolidation, or otherwise)
to expressly assume and agree to perform Delta’s obligations under this
Agreement to the same extent, and in the same manner, as Delta would be required
to perform if no such succession had occurred. This Agreement shall be binding
upon, and inure to the benefit of, any successor to Delta.
15. Wallace’s Successor. This Agreement shall inure to the benefit of, and be
enforceable by, Wallace’s personal or legal representatives, designated
beneficiary, administrators, executors and heirs. If Wallace should die after
the Effective Date but before any payment or benefit to which Wallace is
entitled under this Agreement has been received by Wallace, all payments or
benefits to which Wallace would have been entitled had he continued to live
(other than any such benefits that, by their terms, terminate upon Wallace’s
death) shall be made or provided in accordance with this Agreement to the
representatives, executors, or administrators of Wallace’s estate.
16. Restricted Assignment. Except as expressly provided in Sections 14 and 15,
neither Party may assign, transfer, or delegate this Agreement or any of its or
his rights or obligations under this Agreement without the prior written consent
of the other Party. Any attempted assignment, transfer, or delegation in
violation of the preceding sentence shall be void and of no effect.
17. Waiver and Amendment. No term or condition of this Agreement shall be deemed
waived other than by a writing signed by the Party against whom or which
enforcement of the waiver is sought. Without limiting the generality of the
preceding sentence, a Party’s failure to insist upon the other Party’s strict
compliance with any provision of this Agreement or to assert any right that a
Party may have under this Agreement shall not be deemed a waiver of that
provision or that right. Any written waiver shall operate only as to the
specific term or condition waived under the specific circumstances and shall not
constitute a waiver of that term or condition for the future or a waiver of any
other term or condition. No amendment or modification of this Agreement shall be
deemed effective unless stated in a writing signed by the Parties.

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18. Entire Agreement. This Agreement contains the Parties’ entire agreement
regarding the subject matter of this Agreement and supersedes all prior
agreements and understandings between them regarding such subject matter (except
as reserved herein). The Parties have made no agreements, representations, or
warranties regarding the subject matter of this Agreement that are not set forth
in this Agreement.
19. Notice. Each notice or other communication required or permitted under this
Agreement shall be in writing and transmitted, delivered, or sent by personal
delivery, prepaid courier or messenger service (whether overnight or same-day),
prepaid telecopy or facsimile, or prepaid certified United States mail (with
return receipt requested), addressed (in any case) to the other Party at the
address for that Party set forth below that Party’s signature on this Agreement,
or at such other address as the recipient has designated by notice to the other
Party, with a copies as follows:
If to Wallace,
John R. Wallace
4925 Larkspur Street
Bow Mar, Colorado 80123
and
Rothgerber Johnson & Lyons LLP
c/o Kris J. Kostolansky
One Tabor Center, Suite 3000
1200 Seventeenth Street
Denver, Colorado 80202
P: (303) 628.9515
F: (303) 623.9222
If to Delta,
Delta Petroleum Corporation
c/o Ted Freedman, Executive Vice President and General Counsel
370 17th Street, Suite 4300
Denver, Colorado 80202
P: (303) 575-0349
F: (303) 293-0066
and

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Davis Graham & Stubbs LLP
c/o Ron Levine
1550 Seventeenth Street, Suite 500
Denver, Colorado 80202
P: (303) 892-7514
F: (303) 893-1379
Each notice or communication so transmitted, delivered, or sent in person, by
courier or messenger service, or by certified United States mail shall be deemed
given, received, and effective on the date delivered to or refused by the
intended recipient (with the return receipt, or the equivalent record of the
courier or messenger, being deemed conclusive evidence of delivery or refusal.)
Nevertheless, if the date of delivery is after 5:00 p.m. on a business day, the
notice or other communication shall be deemed given, received, and effective on
the next Business Day.
20. Severability. It is the desire of the Parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision
contained herein be held unenforceable by a court of competent jurisdiction or
arbitrator (pursuant to Section 12), the Parties hereby agree and consent that
such provision shall be reformed to create a valid and enforceable provision to
the maximum extent permitted by law; provided, however, if such provision cannot
be reformed, it shall be deemed ineffective and deleted herefrom without
affecting any other provision of this Agreement. This Agreement should be
construed by limiting and reducing it only to the minimum extent necessary to be
enforceable under then applicable law.
21. Title and Headings; Construction. Titles and headings to sections hereof are
for the purpose of reference only and shall in no way limit, define or otherwise
affect the provisions hereof. The words “herein,” “hereof,” “hereunder” and
other compounds of the word “here” shall refer to the entire Agreement and not
to any particular provision.
22. Governing Law; Jurisdiction. All matters or issues relating to the
interpretation, construction, validity, and enforcement of this Agreement shall
be governed by the laws of the State of Colorado, without giving effect to any
choice-of-law principle that would cause the application of the laws of any
jurisdiction other than Colorado. Jurisdiction and venue of any action or
proceeding relating to this Agreement or any dispute (to the extent arbitration
is not required under Section 12) shall be exclusively in Denver, Colorado.
23. Survival of Certain Provisions. Wherever appropriate to the intention of the
Parties, the respective rights and obligations of the Parties hereunder shall
survive any termination or expiration of this Agreement.
24. Counterparts. This Agreement may be signed in counterparts, with the same
effect as if both Parties had signed the same document. All counterparts shall
be construed together to constitute one, and the same, document.
[Signature Page Follows]

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     IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective as of the Effective Date.

          WALLACE:    
 
       
Signature:
  /s/ John R. Wallace    
 
        Name: John R. Wallace    
 
       
 
       

          DELTA:  
 
        Delta Petroleum Corporation, a Delaware corporation
 
       
By:
  /s/ Stanley F. Freedman    
 
        Its: Executive Vice President     Name: Stanley F. Freedman    

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