Exhibit 10.1


 


SEVERANCE
AGREEMENT


 


This
Severance
Agreement between
Edge Petroleum Corporation, a Delaware corporation
(the “Company”), and Gary L. Pittman (“Employee”).


 


WITNESSETH:


 


WHEREAS, the Company desires to retain certain
employee personnel and, accordingly, the Board of Directors of the Company (the
“Board”) approved the Company entering
into a severance agreement with Employee in order to encourage such employee’s
continued service to the Company; and


 


WHEREAS,
Employee is prepared to commit such services in return for specific
arrangements with respect to severance compensation and other benefits; and


 


WHEREAS,
in consideration for Employee’s agreement to enter into this Severance
Agreement, the Company will, upon the occurrence of a Change of Control (as
defined in Section 1(b) of this Agreement), automatically vest any
Restricted Stock Award that is outstanding as of the date of such Change of
Control; and


 


WHEREAS,
effective immediately, the Company and Employee desire to establish documentary
compliance with Section 409A of the Internal Revenue Code of 1986, as
amended;


 


NOW
THEREFORE, in
consideration of the foregoing and for other good and valuable consideration,
the Company and Employee agree as follows:


 


1.                                                 Definitions


 


(a)                      “Change in Duties” shall mean the occurrence, within two
years after the date upon which a Change of Control occurs, of any one or more
of the following conditions provided that the Employee has notified the Company
of the existence of such condition within 90 days of its initial existence and
the Company has not cured the condition within 30 days after such notice is
provided (the “Correction Period”):


 


(i)                           A
significant reduction in the duties of Employee from those applicable to the
Employee immediately prior to the date on which a Change of Control occurs; or


 


(ii)                        A material
reduction in Employee’s annual salary from that provided to the Employee immediately
prior to the date on which a Change of Control occurs; or


 


 (iii)                  A change in the location of Employee’s
principal place of employment by the Company by more than 50 miles from the
location where he or she was 


 

















 


principally
employed immediately prior to the date on which a Change of Control occurs.


 


(b)                     “Change of Control” means the occurrence of either of the following
events:


 


(i)                         The
Company (A) shall not be the surviving entity in any merger, consolidation
or other reorganization (or survives only as a subsidiary of an entity other
than a previously wholly-owned subsidiary of the Company) or (B) is to be
dissolved and liquidated, and as a result of or in connection with such
transaction which for the avoidance of doubt, applies to (A) and (B), the
persons who were directors of the Company before such transaction shall cease
to constitute a majority of the Board;


 


 (ii)                   Any person or
entity, including a “group” as contemplated by Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of 20% or more of the
outstanding shares of the Company’s voting stock (based upon voting power), and
as a result of or in connection with such transaction, the persons who were
directors of the Company before such transaction shall cease to constitute a
majority of the Board; or


 


(iii)                   The Company sells all or
substantially all of the assets of the Company to any other person or entity
(other than a wholly-owned subsidiary of the Company) in a transaction that
requires shareholder approval pursuant to the Texas Business Corporation Act.


 


(c)                     “Code” shall mean the Internal Revenue Code of 1986, as
amended.


 


(d)                    “Compensation” shall mean the greater of:


 


(i)                         Employee’s
current annual salary plus his or her Targeted Bonus Opportunity immediately
prior to the date on which a Change of Control occurs, or


 


(ii)                      Employee’s
current annual salary plus his or her Targeted Bonus Opportunity at the time of
his or her Involuntary Termination.


 


(e)                     “Incentive Award” shall mean any grant or award of
restricted stock, stock options or other benefits or awards made to an Employee
under the Incentive Award Plan.


 


(f)                       “Incentive
Award Plan” shall mean Edge Petroleum Corporation 1997 Incentive Plan, as
amended, or any successor thereto.


 


(g)                    “Involuntary Termination” shall mean any termination of
Employee’s employment with the Company which:


 


2

















 


(i)                         does
not result from a resignation by Employee (other than a resignation pursuant to
Clause (ii) of this paragraph (g) or a resignation at the request of
the Company); or


 


(ii)                      results
from a resignation by Employee on or before the date which is thirty days after
the expiration of the Correction Period associated with a Change in Duties;
provided, however, the term “Involuntary  Termination” shall not include a Termination for Cause or
any termination as a result of death, disability under circumstances entitling
him to benefits under the Company’s long-term disability plan.


 


(h)                    “Severance Amount” shall mean an amount equal to 2.0 times
Employee’s Compensation.


 


(i)                        “Targeted Bonus
Opportunity” shall mean the Employee’s current targeted bonus
opportunity, if any, as approved by the Compensation Committee effective for
the year with respect to which such targeted bonus opportunity, if any, is
being determined or for the last year for which such an opportunity was so
approved if one has not been approved for the current year, expressed as a
dollar amount.


 


(j)                        “Termination
for Cause” shall mean termination of Employee’s employment by the Company
(or its subsidiaries) by reason of (a) conviction of the Employee by a
court of competent jurisdiction of any felony or a crime involving moral
turpitude; (b) the Employee’s knowing failure or refusal to follow
reasonable instructions of the Board or reasonable policies, standards and
regulations of the Company or its subsidiaries as set forth in the employee
manual or otherwise; (c) the Employee’s continued failure or refusal to
faithfully and diligently perform the usual, customary duties of his or her
employment with the Company or a subsidiary; (d) the Employee continuously
conducting himself or herself in an unprofessional, unethical, immoral or
fraudulent manner; or (e) the Employee’s conduct discredits the Company or
a subsidiary or is detrimental to the reputation, character and standing of
the  Company or a subsidiary.


 


2.                                                 Services.  Employee agrees that he or she will render
services to the Company (as well as any subsidiary thereof or successor
thereto) during the period of his or her employment to the best of his or her ability
and in a prudent and businesslike manner.


 


3.                                                 Severance Benefits.     If Employee’s employment by the Company or any
subsidiary thereof or successor thereto shall be subject to an Involuntary
Termination which occurs within two years after the date upon which a Change of
Control occurs, then Employee shall be entitled to receive, as additional
compensation for services rendered to the Company (including its subsidiaries),
the following severance benefits:


 


(a)                        A
lump sum cash payment in an amount equal to Employee’s Severance Amount.


 


(b)                       Effective
as of the date of Involuntary Termination, Employee shall become fully vested
in all outstanding Incentive Awards that had not previously vested or 


 


3

















 


otherwise become
exercisable as of such date due to restrictions or other provisions contained
in the document granting such Incentive Award, such restrictions or other
provisions in such document notwithstanding.


 


(c)                                Employee and, if applicable, his or her
eligible dependents who are covered under the Company’s medical, dental or
vision plans (collectively, the “Company Group Health Plans”) as of the date on
which Employee’s Involuntary Termination occurs shall be entitled to elect to
continue coverage under the Company Group Health Plans in accordance with
section 4980B of the Code and sections 601-607 et  seq. of the
Employee Retirement Income Security Act of 1974, as amended (“COBRA”), or
similar provisions of applicable state continuation coverage laws.  If and to the extent that Employee and/or his
or her eligible dependents elect COBRA coverage then, during the Continuation
Period (defined below), Employee and, if applicable, his or her covered
dependents shall be required to pay the active employee rates applicable to
similarly situated active employees for the applicable type and level of
coverage under the applicable Company Group Health Plans (the “Employee
Contribution”) and the Company shall pay the remainder of any required premium
for the Continuation Period.  For
purposes of this Agreement, the “Continuation Period” shall be the period
commencing on the date of Employee’s Involuntary Termination and ending on the
earliest to occur of (i) the expiration of eighteen months after Employee’s
Involuntary Termination (or any additional period required pursuant to
applicable federal or state law), (ii) the date Employee or, if
applicable, his or her covered dependents, is eligible for medical, dental or
vision coverage, as applicable, under another employer-provided group health
plan (with Employee being obligated hereunder to report such eligibility to the
Company within 30 days and certify eligibility for payments hereunder promptly
upon request of the Company), or (iii) the date on which COBRA coverage
(or applicable state continuation coverage, if applicable) terminates.  The amount and due dates for such payment
shall be communicated to Employee and, if applicable, his or her eligible
dependents within 44 days of the date of Employee’s Involuntary Termination.  The foregoing is intended to reflect
financial agreements between Employee and the Company and shall not be
construed to limit Employee’s rights under COBRA.  The Continuation Period shall run
concurrently with the required COBRA continuation coverage period (and any
period of state continuation coverage required by applicable law) and shall not
extend any person’s COBRA continuation coverage period (or period of state
continuation coverage).


 


(d)                               If the Continuation Period expires
pursuant to Section 3(c)(i) above, then following the expiration of
the Continuation Period, if and to the extent that Employee, and, where
applicable, Employee’s covered dependents were covered by the Company Group
Health Plans immediately prior to termination of the Continuation Period and
are not eligible for medical, dental or vision coverage, as applicable, under
another employer-provided group health plan, Employee shall be entitled to
receive a cash lump sum payment equal to eighteen times the monthly amount, if
any, that the Company or its successor (or any parent or 


 


4

















 


affiliate of the Company
or its successor), as applicable, pays to subsidize employee medical, dental or
vision coverage, as applicable, for similarly situated active employees and
their dependents for the type and level of coverage that was being provided to
Employee and his or her covered dependents, if applicable, under the Company
Group Health Plans (as COBRA coverage) immediately prior to the end of the
Continuation Period (the “Company Subsidy Amount”) based on the Company subsidy
rates in effect in the month immediately prior to the expiration of the
Continuation Period.  Payment of such
Company Subsidy Amount shall be made within 30 days of the expiration of the
Continuation Period.


 


(e)                                  In lieu of any Company-provided continued
life insurance or accidental death and dismemberment coverage following
Employee’s Involuntary Termination, Employee shall receive a payment of
$2,000.  The payment required under this
Paragraph 3(e) shall be paid in a lump sum within 15 days following
Employee’s Involuntary Termination.


 


(f)                                    Employee
shall be entitled to receive reimbursement for out-placement services incurred
before the end of the second calendar year following Employee’s Involuntary
Termination in connection with obtaining new employment up to a maximum cost of
$6,000, if Employee is seeking new employment. 
Such reimbursement shall be paid within 90 days of the Company’s receipt
of Employee’s request for reimbursement including any required documentation of
expenses.


 


(g)                           The
severance benefits payable under this agreement shall be paid to the Employee
on or before the fifth day after the last day of Employee’s employment with the
Company.  Any severance benefits paid
pursuant to this paragraph will be deemed to be a severance payment and not
compensation for the purposes of determining benefits under the Company’s
qualified plans and shall be subject to any required tax withholding.


 


4.                                                 Interest on Late Benefit Payments.                    If any payment
provided for in Paragraph 3(a) or 3(b) hereof is not made when due,
the Company shall pay to Employee interest on the amount payable from the date
that such payment should have been made under such paragraph until such payment
is made, which interest shall be calculated at a rate equal to two percentage
points over the prime or base rate of interest announced by Chase Bank of
Texas, N.A. or any successor thereto, at its principal office in Houston, Texas
and shall change when and as such change in such prime or base rate shall be
announced by such bank.


 


5.                                                 Certain Additional Payments by the Company.  Notwithstanding anything to the contrary in
this Agreement, in the event that any payment or distribution by the Company to
or for the benefit of Employee, whether paid or distributed or distributable
pursuant to the terms of this Agreement or otherwise (a “Payment”), would be
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with 


 


5

















 


respect to such excise
tax (such excise tax, together with any such interest or penalties, are
hereinafter collectively referred to as the “Excise Tax”), the Company shall
pay to Employee an additional payment (a “Gross-up Payment”) in an amount such
that after payment by Employee of all taxes (including an interest or penalties
imposed with respect to such taxes), including any Excise Tax imposed on any
Gross-up Payment, Employee retains an amount of the Gross-up Payment equal to
the Excise Tax imposed upon the payment. 
The Company and Employee shall make an initial determination as to
whether a Gross-up Payment is required and the amount of any such Gross-up
Payment. Employee shall notify the Company in writing of any claim by the
Internal Revenue Service which, if successful, would require the Company to
make a Gross-up Payment (or a Gross-up Payment in excess of that, if any,
initially determined by the Company and Employee) within ten days of the
receipt of such claim.  The Company shall
notify Employee in writing at least ten days prior to the due date of any
response required with respect to such claim if it plans to contest the
claim.  The Gross-up Payment to Employee
shall be made no earlier than the date of the Payment to which such Gross-up
Payment relates and no later than December 31 of the year following the
year during which Employee remits the related taxes.  If the Company decides to contest such claim,
Employee shall cooperate fully with the Company in such action; provided,
however, the Company shall bear and pay directly or indirectly all cost and
expenses (including additional interest and penalties) incurred in connection
with such action and shall indemnify and hold Employee 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 the Company’s action.  If, as a result of the Company’s action with
respect to a claim, Employee receives a refund of any amount paid by the
Company with respect to such claim, Employee shall promptly pay such refund to
the Company.  If the Company fails to
timely notify Employee whether it will contest such claim or the Company
determines not to contest such claim, then the Company shall immediately pay to
Employee the portion of such claim, if any, which it has not previously paid to
Employee.


 


6.                                                 General.


 


(a)                        Term.  The effective date of this Agreement is January 26,
2009.  The initial term of this Agreement
shall be the period beginning on said effective date and ending on the two-year
anniversary of said effective date. 
Within sixty days after the expiration of this Agreement and within
sixty days after each successive two-year period of time thereafter that this
Agreement is in effect, the Company shall have the right to review this
Agreement, and in its sole discretion either continue and extend this
Agreement, terminate this Agreement, and/or offer Employee a different
agreement, and will notify Employee of such action before the end of said
sixty-day time period mentioned above. 
This Agreement shall remain in effect until so terminated and/or
modified by the Company.  Failure of the
Company at any time and from time to time to take any action within any of said
sixty-day time periods shall be considered as an extension of this Agreement
for an additional two-year period of time. 
Notwithstanding anything to the contrary contained in this “sunset provision,” it is agreed that if a Change of Control



 


6

















 


occurs while this
Agreement is in effect, then this Agreement shall not be subject to termination
or modification under this “sunset  provision,” and shall remain in force for a period of two
years after such Change of Control, and if within said two years the
contingency factors occur which would entitle Employee to the benefits as
provided herein, this Agreement shall remain in effect in accordance with its
terms.  If, within such two years after a
Change of Control, the contingency factors that would entitle Employee to said
benefits do not occur, thereupon this two-year “sunset
provision” shall again be applicable with the sixty-day time period
for Company action (to either continue, extend, terminate or offer Employee
different agreement shall thereafter commence at the expiration of said two
years after such Change of Control and on each two-year anniversary date
thereafter.


 


(b)                                           Indemnification.  If Employee shall obtain any money judgment
or otherwise prevail with respect to any litigation brought by Employee or the
Company to enforce or interpret any provision contained herein, the Company, to
the fullest extent permitted by applicable law, hereby indemnifies Employee for
his or her reasonable attorneys’ fees and disbursements incurred in such
litigation and hereby agrees (i) to pay in full all such fees and
disbursements and (ii) to pay prejudgment interest on any money judgment
obtained by Employee from the earliest date that payment to Employee should
have been made under this Agreement until such judgment shall have been paid in
full, which interest shall be calculated at a rate equal to two percentage
points over the prime or base rate of interest announced by Chase Bank of
Texas, N.A. (or any successor thereto) at its principal office in Houston,
Texas, and shall change when and as any such change in such prime or base rate
shall be announced by such bank.


 


(c)                                  Payment Obligations Absolute.  The Company’s obligation to pay (or cause one
of its subsidiaries to pay) Employee the amounts and to make the arrangements
provided herein shall be absolute and unconditional and shall not be affected
by any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company (including its
subsidiaries) may have against the Employee or anyone else.  All amounts payable by the Company (including
its subsidiaries hereunder) shall be paid without notice or demand.  Employee shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and, except
as provided in Paragraph 3(c), (d) or (e) hereof, the
obtaining of any such other employment shall in no event effect any reduction
of the Company’s obligations to make (or cause to be made) the payments and
arrangements required to be made under this Agreement.


 


(d)                                       Successors.  This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company, by
merger, combination, asset sale or otherwise. 
This Agreement shall also be binding upon and inure to the benefit of
Employee and his or her estate.  If
Employee shall die prior to full payment of 


 


7

















 


amounts due pursuant to
this Agreement, such amounts shall be payable pursuant to the terms of this
Agreement to his or her estate.


 


(e)                                    Severability.  Any
provision in this Agreement which is prohibited or un-enforceable in any
jurisdiction by reason of applicable law shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without
invalidating or affecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.


 


(f)                                      Non-Alienation.  Employee shall not have any right to pledge,
hypothecate, anticipate or assign this Agreement or the rights hereunder,
except by will or the laws of descent and distribution.


 


(g)                                 Notices.  Any notices or other communications provided
for in this Agreement shall be sufficient if in writing.  In the case of Employee, such notices or
communications shall be effectively delivered if hand delivered to Employee at
his or her principal place of employment or if sent by registered or certified
mail to Employee at the last address he or she has filed with the Company.  In the case of the Company, such notices or
communications shall be effectively delivered if sent by registered or
certified mail to the Company at its principal executive offices.


 


(h)                                 Controlling Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.  Further, Employee agrees that any legal
proceeding to enforce the provisions of this Agreement shall be brought in
Houston, Harris County, Texas, and hereby waives the right to any pleas
regarding subject matter or personal jurisdiction and venue.


 


(i)                                     Release.                Any benefit payable pursuant to Section 3
herein is subject to Employee’s execution of a release, without subsequent
revocation, within 60 days of Employee’s termination, in the form established
by the Company, releasing the Company, its shareholders, partners, officers,
directors, employees and agents from any and all claims and from any and all
causes of action of any kind or character (except claims arising under this
Agreement), including but not limited to all claims or causes of action arising
out of Employee’s employment with the Company or, with the exception of rights
provided in any other written agreement between the Company and Employee, the
termination of such employment.


 


(j)                                     Full Settlement.  If Employee is entitled to and receives the
benefits provided hereunder, performance of the obligations of the Company hereunder
will constitute full settlement of all claims that Employee might otherwise
assert against the Company on account of Employee’s termination of employment,
except such claims as may be asserted pursuant to any other agreement between
the Company and Employee.


 


8

















 


(k)                                  Unfunded Obligation.  The obligation to pay amounts under this
Agreement is an unfunded obligation of the Company (including its
subsidiaries), and no such obligation shall create a trust or be deemed to be
secured by any pledge or encumbrance on any property of the Company (including
its subsidiaries).


 


(l)                                     Not a Contract of Employment.  This Agreement shall not be deemed to
constitute a contract of employment, nor shall any provision hereof affect (i) the
right of the Company (or its subsidiaries) to discharge Employee at will,
subject to the terms of any other agreement between the Company (or its
subsidiaries) and Employee, or (ii) the terms and conditions of any other
agreement between the Company and Employee except as provided herein.


 


(m)                               Number and Gender.  Wherever appropriate herein, words used in
the singular shall include the plural and the plural shall include the
singular.  The masculine gender where
appearing herein shall be deemed to include the feminine gender.


 


(n)                                 Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.


 


(o)                                 Headings.  The headings in this Agreement are for
convenience only and shall be disregarded in construing this Agreement.


 


(p)                                 Section 409A.  This Agreement is intended to comply with
Code Section 409A and any ambiguous provision will be construed in a
manner that is compliant with or exempt from the application of Code Section 409A.  If any provision of this Agreement would
cause Employee to incur any additional tax or interest under Code Section 409A
and accompanying Treasury regulations and guidance, Employer shall, after
consulting with Employee, reform such provision to comply with Code Section 409A,
to the extent permitted under Code Section 409A; provided, however, that
Employer agrees to maintain, to the maximum extent practicable, the original
intent and economic benefit to Employee of the applicable provision without
violating the provisions of Code Section 409A.  Notwithstanding any provision to the contrary
in this Agreement, if Employee is deemed on his termination date to be a “specified
employee” within the meaning of that term under Section 409A(a)(2)(B) of
the Code, then the payments and benefits under this Agreement that are subject
to Code Section 409A shall be made or provided (subject to the last
sentence hereof) on the later of (A) the payment date set forth in this
Agreement or (B) the date that is the earliest of (i) the expiration
of the six-month period measured from the date of Employee’s Termination of
employment or (ii) the date of Employee’s death (the “Delay Period”).  Payments subject to the Delay Period shall be
paid to Employee without interest for such delay in payment.  Notwithstanding any provision of this
Agreement to the contrary, Employee acknowledges and agrees that the Company
and its employees, officers, directors, Affiliates and Subsidiaries shall not
be liable for, and nothing provided or contained in this Agreement will be
construed to obligate or cause the Company 


 


9

















 


and/or its employees,
officers, directors, Affiliates and Subsidiaries to be liable for, any tax,
interest or penalties imposed on Employee related to or arising with respect to
any violation of Section 409A.


 


IN
WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT ON THE 29TH DAY
OF JANUARY, 2009.


 


	
   

  	
  “Company”

  
	
   

  	
   

  
	
   

  	
  EDGE
  PETROLEUM CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ John W. Elias

  
	
   

  	
   

  	
  John W. Elias

  
	
   

  	
   

  	
  Chairman, President and

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “Employee”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Gary L. Pittman

  
	
   

  	
   

  	
  Gary L. Pittman

  



 


10