EXHIBIT 10
CHANGE-IN-CONTROL EXECUTIVE SEVERANCE AGREEMENT
     This Change-in-Control Severance Agreement (this (“Agreement”), dated and
effective September 4, 2007, is between Panhandle Oil and Gas Inc., an Oklahoma
corporation (the “Company”), and                                          (the
“Executive”).
Statement of Purpose
     The Company desires, for its continued success, to have the benefit of
services of experienced management personnel like the Executive. The Board of
Directors of the Company therefore believes that it is in the best interest of
the Company that, in the event of any prospective change in control of the
Company, the Executive be reasonably secure in his employment and position with
the Company, so that the Executive can exercise independent judgment as to the
best interest of the Company and its shareholders, without distraction by any
personal uncertainties or risks regarding the executive’s continued employment
with the Company created by the possibility of a change-in-control of the
Company. The Board believes that this Agreement will create an environment that
is best suited to maximizing shareholder value and retaining executive loyalty
and focus when they are needed most and will further align the interests of
Executive with the interests of the Company’s shareholders.
Agreement
     In consideration of the statements made in the Statement of Purpose and the
mutual agreements set forth below, the Company and the Executive agree as
follows:
     1. Protection. In order to protect Executive against the possible
consequences of a “Change-in-Control” of the Company (as defined in Section 2)
and to induce Executive to remain in the employ of the Company and in
consideration of Executive agreeing to remain in the employ of the Company
subject to the terms and conditions set forth below, this Agreement sets forth
the severance benefits which the Company agrees will be provided to Executive in
the event his employment with the Company is terminated on or subsequent to a
Change-in-Control of the Company under the circumstances described below.
     2. Definitions. For purposes of this Agreement, the following capitalized
terms shall have the following meanings:
          (a) “Board” means the Board of Directors of the Company.

1

--------------------------------------------------------------------------------

 

          (b) “Cause” means:
               (i) the willful and continued failure of the Executive to perform
substantially the Executive’s duties with the Company (other than a failure
resulting from incapacity due to physical or mental illness), within a
reasonable period of time after a written demand for substantial performance is
delivered to the Executive by the Board which demand specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed the Executive’s duties; or
               (ii) the willful engaging by the Executive in illegal conduct,
gross misconduct or a clearly established violation of the Company’s written
policies and procedures, in each case, which is materially and demonstrably
injurious to the Company, monetarily or otherwise.
For purposes of this paragraph (b), no act or failure to act, on the part of the
Executive, will be considered “willful” unless done, or omitted to be done, by
the Executive not in good faith and without reasonable belief that the
Executive’s action or omission was in the best interests of the Company. Any
act, or failure to act, based on authority given pursuant to a resolution duly
adopted by the Board or based on the advice of counsel for the Company will be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company.
          (c) “Change-in-Control” means the occurrence of any one or more of the
following:
               (i) any “person” (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other
than a trustee or other fiduciary holding securities under an employee benefit
plan 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 total voting power represented by the
Company’s then outstanding Voting Securities; or
               (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board, and any new director,
whose election by the Board or nomination for election by the Company’s
shareholders 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 of the Board, or
               (iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation that 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) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or
               (iv) 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 (in one transaction or a series of transactions) of all or substantially
all of the Company’s assets.
          (d) “Code” means the Internal Revenue Code of 1986, as amended from
time to time.

2

--------------------------------------------------------------------------------

 

          (e) “Date of Termination” means (i) if Executive’s employment is
terminated by the Company for “Cause,” the date specified in the Notice of
Termination, and (ii) if Executive’s employment is terminated for any other
reason, the date on which a Notice of Termination is given.
          (f) “Effective Date” means September 4, 2007.
          (g) “Good Reason” shall include:
               (i) the assignment to Executive of any position which results, in
the aggregate, in a material reduction in Executive’s rank, authority, duties,
status, or responsibilities as an officer of the Company or Executive is
assigned duties and obligations inconsistent with his position with the Company;
               (ii) Executive’s annual base salary is reduced below the higher
of Executive’s base salary in effect immediately before the Change-in-Control or
Executive’s base salary in effect at any time after the Change-in-Control;
               (iii) Executive is removed from or denied participation in
incentive plans, benefit plans, or perquisites generally provided by the Company
to other executives with a comparable level of responsibility, title or stature;
               (iv) a failure to provide (or a reduction in, if previously
provided) incentive compensation opportunities, benefits or perquisites that are
provided other executives with comparable responsibility, title or stature;
               (v) the failure by the Company to continue to provide the
Executive with benefits similar in all material respects to those enjoyed by the
Executive under any Plan in which the Executive was participating at any time
within three months before the Change-in-Control, the taking of action by the
Company which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit enjoyed by the
Executive at any time three months before the Change-in-Control, or the failure
by the Company to provide the Executive with the number of paid vacation days to
which the Executive is entitled on the basis of years of service with the
Company in accordance with the Company’s normal vacation policy in effect at any
time within three months before the Change-in-Control.
               (vi) the Company’s principal officers are moved to a location
more than 25 highway miles from its current location or Executive is required to
be based anywhere other than the Company’s principal executive offices;
               (vii) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement
satisfactory in form and substance to Executive;
               (viii) any purported termination of the Executive’s employment
which is not effected pursuant to a Notice of Termination satisfying its
requirements, and for purposes of this Agreement, no such purported termination
shall be effective; or
               (ix) any material breach of this Agreement by the Company not
described in paragraphs (i) through (viii) above.
          (h) “Notice of Termination” means a written and dated notice which
indicates the Date of Termination (not earlier than the date on which the notice
is provided), and which indicates the specific termination provision in this
Agreement relied on and which sets forth in reasonable

3

--------------------------------------------------------------------------------

 

detail the facts and circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so indicated.
          (i) “Plan” means any bonus, incentive compensation, retirement, stock
ownership or purchase, pension, deferred compensation, or welfare benefits plan,
policy, practice, program or arrangement of (including any separate contract or
agreement with) the Company for its employees.
          (j) “Voting Securities” means the Company’s Class A Common Stock, par
value $0.01666 per share, and any other securities of the Company that vote
generally in the election of directors.
     3. Change-in-Control. No benefits shall be payable hereunder unless there
shall have been a Change-in-Control of the Company, and Executive’s employment
by the Company shall have been terminated in accordance with Section 5 below.
     4. Rights Provided By Agreement. This Agreement does not constitute a
guarantee of continued employment but instead provides for certain rights and
benefits in the event Executive’s employment with the Company terminates under
the circumstances provided herein.
     5. Termination Following Change-in-Control.
          (a) Severance Payment. If, on the occurrence of a Change-in-Control
or, within two (2) years following the occurrence of a Change-in-Control,
(i) Executive’s employment with the Company is terminated by the Company other
than for Cause or Executive’s death, or (ii) Executive resigns for Good Reason,
then the Company shall pay to Executive as severance pay in a lump sum, in cash,
on or before the fifth day following the Date of Termination, an amount equal to
two (2) times the average of the compensation paid to Executive during the two
(2) calendar years preceding the Change-in-Control (or the annual average for
any shorter period, if applicable). For this purpose, compensation shall include
the sum of Executive’s base salary, bonuses and contributions made by the
Company to its ESOP Plan on Executive’s behalf. The bonus used in determining
Executive’s compensation shall not in any event be less than Executive’s
targeted bonus for the calendar year in which the Change-in-Control occurs (or
if not yet determined for that calendar year in which the Change-in-Control
occurs, the Executives’ targeted bonus for the preceding calendar year. In
addition, the Company shall promptly reimburse Executive each month for all
costs incurred by Executive of purchasing COBRA continuing coverage (as
described in Section 4980B of the Code) for Executive and all of Executive’s
dependents following Executive’s Date of Termination for so long as Executive
qualifies for such continuing coverage.
          (b) Notice of Termination. Any termination of Executive’s employment
by Executive for Good Reason shall be communicated by Notice of Termination to
the Company. Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to him a copy of a Notice of
Termination from the Board, after reasonable notice to Executive and an
opportunity for Executive, together with his counsel, to be heard before the
Board, finding that, in the good faith opinion of the Board, Executive was
guilty of conduct set forth above in clauses (i) or (ii) in Section 5(a) and
specifying the particulars thereof in detail.
     6. Term of Agreement. This Agreement will continue in effect until the
earlier of:
          (a) The termination or cessation of the Executive’s employment with
the Company before a Change-in-Control; or

4

--------------------------------------------------------------------------------

 

          (b) The Company’s performance of all of its obligations, and the
Executive’s receipt of all of the payments and benefits to which he is entitled,
under this Agreement after a Change-in-Control.
     7. Certain Additional Payments By the Company.
          (a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution from the Company
to the Executive or for the Executive’s benefit, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise but determined without regard to any additional payments required
under this Section 7 (a “Payment”), would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Excise Tax”), then the Executive
shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an
amount such that after payment by Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including any Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the sum of (i) the Excise Tax imposed upon the
Payments; plus (ii) an amount equal to the product of any deductions disallowed
for federal, state, or local income tax purposes because of the inclusion of the
Gross-Up Payment in the Executive’s adjusted gross income multiplied by the
highest applicable marginal rate of federal, state, or local income taxation,
respectively, for the calendar year in which the Gross-Up Payment is to be made.
          (b) Subject to the provisions of Section 7(c), all determinations
required to be made under this Section 7, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by Ernst &
Young LLP or another nationally recognized certified public accounting firm as
may be selected by the Company (the “Accounting Firm”) which shall provide
detailed supporting calculations both to the Company and the Executive within
fifteen (15) business days of the receipt of notice from the Executive that
there has been a Payment which would be subject to the Excise Tax, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change-in-Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). The
initial Gross-Up Payment, if any, as determined pursuant to this Section 7(b),
shall be paid to the Executive within five (5) days of the receipt of the
Accounting Firm’s determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with an
opinion that the Executive has substantial authority not to report any Excise
Tax on the Executive’s federal income tax return. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
a Gross-Up Payment which will not have been made by the Company should have been
made (“Underpayment”), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 7(c) and the Executive thereafter is required to may a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
          (c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive knows
of such claim, and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
any claim prior to the expiration of the 30-day period following the date on
which the Executive gives

5

--------------------------------------------------------------------------------

 

such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
               (i) give the Company any information reasonably requested by the
Company relating to such claim;
               (ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company;
               (iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
               (iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 7(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner. The Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on a interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income
tax, including interest or penalties with respect thereto, imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
          (d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 7(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company’s complying with the requirements of Section 7(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 7(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty
(30) days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

6

--------------------------------------------------------------------------------

 

     8. Mitigation. Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Agreement be
reduced by any compensation earned by Executive as the result of any other
employment, consulting relationship, or other business activity after the Date
of Termination.
     9. No Set-0ff. The Company’s obligations under this Agreement are absolute
and unconditional, and not subject to any set-off, counterclaim, recoupment,
defense, or other right that the Company or any affiliate may have against the
Executive.
     10. Tax Withholding. The Company shall withhold from any payment or
benefits under this Agreement (whether or not otherwise acknowledged under this
Agreement) all federal, state, local, or other taxes as may be legally required
to be withheld.
     11. Executive’s Legal Expenses. The Company shall pay the Executive an
amount equal to the reasonable legal fees and other expenses incurred in good
faith by him in obtaining or retaining payments and benefits under this
Agreement, including all such fees and expenses (if any) in enforcing, in good
faith, any right or benefit provided by this Agreement or in connection with the
contest or defense of any tax audit or proceeding by the Internal Revenue
Service to the extent that Section 3999 of the Code is alleged or claimed to
apply to any payment or benefit provided under this Agreement. The Company will
be obligated under the preceding sentence even if the Executive is not
successful in any enforcement claim or counterclaim by him, or in any such tax
contest or defense, so long as he acted in good faith. The Company shall make
any payment required by this Section 10 within seven (7) days after written
notice from the Executive requesting payment and providing such evidence of the
incurrence of those fees and expenses as the Company may reasonably request.
     12. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive’s continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
agreements with the Company or an of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan or program of the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan or program.
     13. Successors and Binding Effect.
          (a) Successor Must Assume Agreement. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly 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 had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive terminated employment for Good Reason
following a Change-in-Control of the Company, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date of termination of employment. As used in this
Agreement, “Company” shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operating of law or otherwise.

7

--------------------------------------------------------------------------------

 

          (b) Binding Effect. This Agreement shall inure to the benefit of and
be enforceable by the Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to the Executive
hereunder if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive’s devisee, legatee or other designee or, if there is
no such designee, to the Executive’s estate.
     14. Interest. If any amounts due and payable hereunder to Executive are not
paid by the Company or its successor when due, the unpaid amount will bear
interest at the per annum rate equal to twelve percent (12%) (the provision for
such interest is not intended to alter, and shall not be construed as altering,
the Company’s obligation to pay, and the Executive’s right to receive, all
payments due hereunder in a timely manner).
     15. Miscellaneous.
          15.1 Amendment of Agreement. No supplement, modification, or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
binding unless in the form of a writing signed by the party against whom
enforcement of the waiver is sought, and no such waiver shall operate as a
waiver of any other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver. Except as specifically provided herein,
no failure to exercise or any delay in exercising any right or remedy hereunder
shall constitute a waiver thereof.
          15.2 Severability. If any provision (or portion thereof) of this
Agreement shall be held by a court of competent jurisdiction to be invalid,
void, or otherwise unenforceable, the remaining provisions shall remain
enforceable to the fullest extent permitted by law. Furthermore, to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of this Agreement containing any provision held to be
invalid, void, or otherwise unenforceable, that is not itself invalid, void, or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, void, or unenforceable.
          15.3 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Oklahoma applicable to
contracts made and to be performed in such State without giving effect to the
principles of conflicts of laws.
          15.4 Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written document: (i) delivered in person, or (ii)sent by facsimile (with a copy
sent by first class mail, postage prepaid), or (iii) sent by nationally
recognized overnight courier service, or (iv) mailed by first class certified or
registered mail, return receipt requested, postage prepaid, addressed to such
party at the address set forth below or such other address as may hereafter be
designated on the signature pages of this Agreement or in writing by such party
to the other party.
          Notices provided in accordance with this Section 15.4 shall be deemed
to have been delivered: (i) if personally delivered, upon delivery; (ii) if sent
by facsimile transmission, upon electronic confirmation by the sender when
received; (iii) if sent by overnight courier service, 24 hours after deposit
with that service; or (iv) if sent by certified or registered mail, return
receipt requested, 48 hours after deposit in the mail.

To Company:   Panhandle Oil and Gas Inc.

5400 Grand Boulevard, Suite 300
Oklahoma City, OK 73112

8

--------------------------------------------------------------------------------

 

Attention: President
Facsimile: 405.948.2038
and

To Executive:   At Executive’s current home address on file.

          15.5 Specific Performance, Etc. The parties recognize that if any
provision of this Agreement is violated by the Company, the Executive may be
without an adequate remedy at law. Accordingly, in the event of any such
violation, the Executive shall be entitled, if the Executive so elects, to
institute proceedings, either in law or at equity, to obtain damages, to enforce
specific performance, to enjoin such violation, or to obtain any relief or any
combination of the foregoing as the Executive may elect to pursue.

9

--------------------------------------------------------------------------------

 

          15.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall for all purposes be deemed to be an original but all of
which together shall constitute one and the same agreement. Only one such
counterpart signed by the party against whom enforceability is sought needs to
be produced to evidence the existence of this Agreement.
15.7 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 hereto.
          15.8 Entire Agreement. This Agreement, including the Statement of
Purpose, contains the parties’ entire agreement regarding the subject matter of
this Agreement and supersedes all prior agreements and understandings between
them regarding that subject matter. The parties have made no agreements,
representations or warranties regarding the subject matter of this Agreement
that area not set forth in this Agreement.
          15.9 Headings. All headings in this Agreement are for convenience only
and are not intended to affect the meaning of any provision hereof.
     In Witness Whereof, the parties have executed and delivered this Agreement
as of the Effective Date.

                 
 
                    “COMPANY”   PANHANDLE OIL AND GAS INC.    
 
               
 
      By:        
 
               
 
          E. Chris Kauffman,
Chairman of the Board    
 
               
 
  “EXECUTIVE”                          

10