EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT
(this “Agreement”) is made
and entered into as of the 1st day of
August, 2008, by and between EnerJex Resources, Inc., a
Nevada corporation (“EnerJex”), and C. Xxxxxxx Xxxxxxxxx (“Cochennet”).
W
I T N E S S E T H:
WHEREAS, the officers,
managers and/or directors of EnerJex are of the opinion that Cochennet has
education, experience and/or expertise which is of value to EnerJex and its
owners, and
WHEREAS, EnerJex and Cochennet
desire to enter into this Employment Agreement, pursuant to which Cochennet
shall be employed by EnerJex, to set forth the respective rights, duties and
obligations of the parties hereto.
NOW THEREFORE, in
consideration of the promises and covenants contained herein, and other good and
valuable consideration, the receipt and sufficiency of which the parties hereto
acknowledge, EnerJex and Cochennet agree as follows:
1.
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EMPLOYMENT. EnerJex
hereby agrees to employ Cochennet and Cochennet hereby accepts such
employment, upon the terms and conditions hereinafter set
forth.
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2.
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TERM. For
purposes of this Agreement, “Term” shall
mean the original term (as defined in Section 2.1
below), if Renewal Term is initiated, then “Term” shall mean the renewal
term period.
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2.1
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Original
Term: The
Term of this Agreement shall commence on August 1, 2008 and expire on July
31, 2011, unless sooner terminated pursuant to the terms and provisions
herein stated.
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2.2
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Renewal
Term(s): This
Agreement shall automatically be extended for additional one (1) year
renewal terms unless earlier terminated in accordance with the provisions
of Section 6 below. Within 180 days from the end of the original contract
either party can notify the other side if they desire to terminate the
contract, otherwise the contract automatically renews as stated
above.
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3. COMPENSATION.
3.1
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Salary: EnerJex shall pay
Cochennet a base annual salary of Two Hundred Thousand Dollars ($200,000)
per annum, payable in accordance with EnerJex’s normal policies but in no
event less often than semi-monthly (the “Base
Salary”). Effective April 1, 2009 and each April 1st
thereafter,
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1
Cochennet’s
Base Salary shall be reviewed and adjusted in the discretion of the Governance
Compensation and Nominating Committee of the Board of Directors of EnerJex. The
Governance, Compensation and Nominating Committee of the Board of Directors
shall have the right to increase the Base Salary more often than annually at its
sole discretion.
3.2
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Incentive
Compensation for Fiscal Year 2009 and Future Years: Cochennet shall also
be eligible for incentive compensation in accordance with Addendum A,
President and Chief Executive Officer Incentive Compensation Plan,
attached hereto and made a part hereof by this
reference.
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3.3
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Fiscal
Year 2008 Incentive Compensation: EnerJex did not have a
formal annual incentive plan in place covering the President and Chief
Executive Officer for the fiscal year ended March 31, 2008. In
recognition of the accomplishments of this past fiscal year, EnerJex shall
pay Cochennet a lump sum cash bonus equal to $50,000.00, less applicable
taxes, within five (5) business days of the execution of this Agreement.
In addition to the cash bonus, EnerJex will xxxxx Xxxxxxxxx 30,000 options
of EnerJex common stock priced at $6.25 per share upon execution of this
agreement. The options will vest immediately and will have a three year
term.
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3.4
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Signing
Bonus: As a
signing bonus, Cochennet shall be paid a one-time bonus equal to 45,000
options of EnerJex common stock priced at $6.25 per share. The
options shall vest based on the following schedule: 10,000 options shall
vest on July 1, 2009; 15,000 options shall vest on July 1, 2010; and
20,000 options shall vest on July 1, 2011. The options will be exercisable
for a three year term following the vesting date. Cochennet must be
employed by EnerJex on the above vesting dates for these options to be
vested.
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3.5
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Equity
Incentive Plans: Cochennet shall be eligible to
participate in EnerJex’s equity incentive plans during the term of
employment as determined by the Governance, Compensation and Nominating
Committee of the Board of Directors. EnerJex anticipates
approaching the shareholders to amend or adopt a plan which will authorize
issuance of restricted shares of common stock of EnerJex to be used in
incentive compensation programs.
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4. EMPLOYEE
BENEFITS.
4.1
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General
Benefits: Cochennet
shall be entitled to receive or participate in all benefit plans and
programs of EnerJex made available from time to time to executives or
senior management of EnerJex, including but not limited to, dental and
medical insurance, pension and profit sharing plans, 401(k) plans,
incentive savings plans, stock option plans, group
life
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2
insurance,
salary continuation plans, disability coverage and other fringe
benefits.
4.2
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Long-term
Disability Insurance: If EnerJex does not
maintain a long term disability plan for its executives and senior
management, Cochennet may seek out and obtain individual long-term
disability insurance (covering a disability lasting for over 180 days) and
EnerJex shall pay for and maintain such insurance for the Term of this
Agreement, including any Renewal Term(s), sufficient to pay Cochennet an
amount up to 50% of his base salary for the period of
incapacity. Notwithstanding the foregoing, in no event shall
EnerJex’s annual payment for such coverage exceed $2,000.00 per year,
unless otherwise approved by the Governance, Compensation and Nominating
Committee of the Board of
Directors.
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4.3
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Director
and Officer Insurance: EnerJex shall use
commercially reasonable efforts to purchase and maintain a Directors and
Officers liability insurance policy on terms and conditions deemed
acceptable by the Board of Directors, acting in good faith, which policy
shall cover Cochennet at all times during his employment Term, including
any Renewal Term(s). Such liability insurance shall be at a value of a
minimum of One Million dollars
($1,000,000).
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4.4
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Business
Expense: Cochennet
shall be entitled to receive proper reimbursement for all reasonable
out-of-pocket expenses incurred for purposes of paying business expenses,
including without limitation, business travel, entertainment, lodging and
similar activities directly by Cochennet in performing Cochennet’s duties
and obligations under this Agreement, including those expenses incurred
for the use of a company cell phone and home office. EnerJex
shall pay or reimburse such expenses on at least a monthly basis, upon
submission by Cochennet of appropriate receipts, vouchers or other
documents in accordance with EnerJex’s
policy.
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4.5
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Automobile
Expenses:
EnerJex shall provide Cochennet with either (i) a corporate vehicle
owned or leased by EnerJex, or (ii) an allowance of up to $1,000.00 per
month for the lease or purchase payments. In addition, EnerJex shall pay
for all expenses relating to Cochennet’s operation and use of an
automobile in the course of performing duties and obligations under this
Agreement. EnerJex shall pay or reimburse such expenses on at
least a monthly basis, upon submission by Cochennet of appropriate
receipts, vouchers or other documents in accordance with EnerJex’s
policy.
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4.6
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Vacation: Cochennet
shall be entitled during the Term of this Agreement to four (4) weeks
vacation per year during which time Cochennet’s compensation will be paid
in full. In an effort to keep Cochennet
fresh
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3
and
alert, Cochennet should make every effort to use allotted vacation time and
there shall be no carry forward of unused days. Cochennet may take
the vacation periods at any time during the year as long as Cochennet schedules
time off as to not create hardship on EnerJex. In addition, Cochennet
shall have such other days off, including paid sick leave and paid holidays, in
accordance with EnerJex’s policy.
5. DUTIES/SERVICE.
5.1
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Position: Cochennet is employed
as President and Chief Executive Officer and a nominated Member of the
Board of Directors and
shall perform such services and duties as are defined in Addendum B, Job
Description, attached hereto, and as are normally associated with such
position, subject to the direction, supervision and rules and regulations
of EnerJex.
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5.2
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Place
of Employment:
The place of Cochennet’s employment and the performance of
Cochennet’s duties will be at EnerJex’s corporate headquarters and at
Cochennet’s home office or at such location as agreed upon by EnerJex and
Cochennet.
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5.3
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Extent
of Services: Cochennet shall at all
times and to the best of his ability perform his duties and obligations
under this Agreement in a reasonable manner consistent with the interests
of EnerJex. The precise services of Cochennet may be extended
or curtailed, from time to time at the discretion of EnerJex, and
Cochennet agrees to render such different and/or additional services of a
similar nature as may be assigned from time to time by
EnerJex. However, EnerJex shall not materially alter
Cochennet’s title, duties, obligations or responsibilities or transfer
Cochennet outside of the Kansas City, Missouri area without Cochennet’s
prior written consent.
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5.3.1 Except as
otherwise agreed by EnerJex and Cochennet in writing, it is expressly understood
and agreed that Cochennet’s employment is fulltime and of a critical nature to
the success of EnerJex and is therefore exclusive. Cochennet may not
be employed by other entities, except for subsidiaries of EnerJex, or otherwise
perform duties and undertakings on behalf of others or for his own interest
unless pre-approved by the Board of Directors. EnerJex acknowledges that
Cochennet presently, or may in the future, serve on the Board of Directors,
provide consulting services for or be an executive officer of other companies
and such action shall not be a breach of this section; provided, however, that such
companies are: (a) listed on Addendum C, attached
hereto; and (b) do not compete with EnerJex or interfere with the performance of
Cochennet’s duties pursuant to this Agreement, as determined in the reasonable
judgment of the Board of Directors.
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5.3.2 Additionally,
EnerJex recognizes that Cochennet has, or may have in the future, equity
positions in other companies, which either: (a) are listed on Addendum C attached
hereto; or (b) do not compete with EnerJex in the reasonable judgment of the
Board of Directors. EnerJex recognizes that such equity positions may
occasionally require some limited attention from Cochennet during normal
business hours. However, Cochennet agrees that if such time is
considered excessive by the Board of Directors, Cochennet shall be so advised
and noticed by EnerJex and Cochennet shall be required to make appropriate
adjustments to ensure his duties and obligations under this Agreement are
fulfilled.
6.
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TERMINATION. The Term of
this Agreement shall end upon its expiration pursuant to Section 2
hereof, provided that this Agreement shall terminate prior to such date:
(a) upon Cochennet’s resignation, death or permanent disability or
incapacity; or (b) by EnerJex at any time for “Cause” (as
defined in Section 6.4
below) or without Cause.
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6.1
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By
Resignation. If
Cochennet resigns with “Good Reason”
(as defined below) this Agreement shall terminate but Cochennet shall be
entitled to receive:
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(a) a
lump sum payment equal to all earned but unpaid Base Salary through the date of
termination of employment,
(b) a
lump sum payment equal to the lesser of (i) 12-months Base Salary or (ii) the
Base Salary Cochennet would have received had he remained in employment through
the end of the then existing Term;
(c) a
lump sum payment equal to the annual incentive amount (assuming achievement at
100% of target) that Cochennet would have earned if he had remained employed
through June 30th
following the last day of the current fiscal year; and
(d) immediate
vesting of all equity awards (including but not limited to stock options and
restricted shares).
For
purposes of this Agreement, “Good Reason” means
any of the following if the same shall occur without Cochennet’s express written
consent:
(i)
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a
material diminution in Cochennet’s Base
Salary;
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(ii)
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a
material diminution in Cochennet's authority, duties, or responsibilities,
including a requirement that Cochennet report to
a
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5
corporate
officer or employee instead of reporting directly to the Board of Directors of
EnerJex;
(iii)
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a
material change in the geographic location at which Cochennet must perform
the services for which he is
employed;
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(iv)
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any
other action or inaction that constitutes a material breach by EnerJex
under this Agreement; or
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(v)
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Cochennet
resigns within twelve (12) months of a Change of Control (as defined in
Section 7).
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Cochennet
shall be required to provide notice to EnerJex of the existence of any of the
foregoing conditions within 30 days of the initial existence of the condition,
upon the notice of which EnerJex shall have a period of 30 days during which it
may remedy the condition without giving rise to the obligations under this
Section 6.1.
If
Cochennet resigns without Good Reason,
Cochennet shall be entitled to receive all earned but unpaid Base Salary through
the date of termination of employment.
6.2
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By
Reason of Incapacity or Disability: If Cochennet becomes
so incapacitated by reason of accident, illness, or other disability that
Cochennet is unable to carry on substantially all of the normal duties and
obligations of Cochennet under this Agreement for a continuous period of
one-hundred-eighty (180) days (the “Incapacity
Period”), this Agreement shall terminate but Cochennet shall be
entitled to receive:
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(a) a
lump sum payment equal to all earned but unpaid Base Salary through the date of
termination of employment,
(b) a
lump sum payment equal to the annual incentive amount (assuming achievement at
100% of target but pro rated based on the number of days worked during the
fiscal year) that Cochennet would have earned if he had remained employed
through June 30th
following the last day of the current fiscal year; and
(c) a
lump sum payment equal to an amount equal to six (6) months Base
Salary.
For
purposes of the foregoing, Cochennet’s permanent disability or incapacity shall
be determined in accordance with the disability insurance policy covering
Cochennet, if such a policy is then in effect, or if no such policy is then in
effect, such permanent disability or incapacity shall be determined by EnerJex’s
Board of Directors in its good faith judgment
6
based
upon Cochennet’s inability to perform normal and reasonable duties and
obligations.
6.3
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By
Reason of Death: If
Cochennet dies during the Term of this Agreement, EnerJex shall pay to
Cochennet’s estate:
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(a) a
lump sum payment equal to all earned but unpaid Base Salary through the date
Cochennet’s death,
(b) a
lump sum payment equal to the annual incentive amount (assuming achievement at
100% of target but pro rated based on the number of days worked during the
fiscal year) that Cochennet would have earned if he had remained employed
through June 30th
following the last day of the current fiscal year; and
(c) a
lump sum payment equal to an amount equal to six (6) months Base
Salary.
Other
death benefits will be determined in accordance with the terms of EnerJex’s
benefit plans and programs.
6.4
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For
Cause. If the Term
of this Agreement is terminated by EnerJex for Cause, Cochennet shall be
entitled to receive all earned but unpaid Base Salary through the date of
termination of employment. However, if a dispute arises between
EnerJex and Cochennet that is not resolved within sixty (60) days and
neither party initiates arbitration proceedings pursuant to Section 13.8,
EnerJex shall have the option to pay Cochennet a lump sum payment equal to
six (6) months Base Salary (the “Severance
Payment”) in lieu of any and all other amounts or payments to which
Cochennet may be entitled relating to his employment with
EnerJex. Such determination to pay the Severance Payment shall
be made in the reasonable judgment of the Board of
Directors. If EnerJex elects to make a payment to Cochennet of
the Severance Payment, the parties hereto agree that such Severance
Payment and the payment provided by Section 6.6
shall be Cochennet’s complete and exclusive remedy for such a termination
for Cause.
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For
purposes of this Agreement, “Cause” shall
mean:
(i)
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an
adjudication of Cochennet’s fraud, theft or dishonesty with respect to
EnerJex;
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(ii)
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Cochennet’s
conviction of a felony, a crime involving moral turpitude or other act
causing material harm to EnerJex’s standing and
reputation;
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7
(iii)
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Cochennet’s
continued material failure to perform Cochennet’s duties to EnerJex after
thirty (30) days’ written notice thereof to Cochennet;
or
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(iv)
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gross
negligence or willful misconduct by Cochennet with respect to
EnerJex.
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6.5
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Without
Cause. If
EnerJex terminates Cochennet’s employment without Cause, Cochennet shall
be entitled to receive:
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(a) a
lump sum payment equal to all earned but unpaid Base Salary through the date of
termination of employment,
(b) a
lump sum payment equal to the annual incentive amount (assuming achievement at
100% of target) that Cochennet would have earned if he had remained employed
through June 30th
following the last day of the current fiscal year;
(c) a
lump sum payment equal to an amount equal to the lesser of (i) 12-months Base
Salary or (ii) the Base Salary Cochennet would have received had he remained in
employment through the end of the then existing Term; and
(d) immediate
vesting of all equity awards (including but not limited to stock options and
restricted shares).
6.6
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Effect
of Termination on Unused Vacation Time: Upon the
termination of this Agreement, unless termination is for Cause, Cochennet
shall also have the right to receive any accrued but unused vacation time
for that current fiscal year, and any benefits vested under the terms of
any applicable benefit plans.
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6.7
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Time
of Payment: Any amounts payable under this Section 6
shall be paid in a single lump sum within 30 days following Cochennet’s
termination of employment.
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6.8
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Release
and Waiver. Notwithstanding the preceding provisions of
this Section 6 or any other provision in this Agreement to the contrary,
Cochennet’s entitlement to any post-termination payment under this
Agreement shall be subject to and conditioned upon Cochennet’s execution
of a release and waiver of claims on the form reasonably acceptable to
EnerJex.
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8
7.
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CHANGE OF
CONTROL.
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For
purposes of this Agreement a “Change of Control” shall mean:
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(i)
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The
consummation of a merger or consolidation of EnerJex with or into another
entity or any other corporate reorganization, if more than 50% of the
combined voting power of the continuing or surviving entity’s securities
outstanding immediately after such merger, consolidation or other
reorganization is owned by persons who were not stockholders of EnerJex
immediately prior to such merger, consolidation or other
reorganization;
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(ii)
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the
sale, transfer or other disposition of all or substantially all of
EnerJex’s assets; or
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(iii)
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The
date that 40% or more of the current members of the Board of Directors as
of the date of this Agreement are replaced by directors who are not
currently members of the Board of
Directors.
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A
transaction shall not constitute a Change of Control if (i) its purpose is to
change the state of EnerJex’s incorporation or to create a holding company that
will be owned in substantially the same proportions by the persons who held
EnerJex’s securities immediately before such transaction, (ii) create a separate
entity, such as an MLP for holding certain assets of EnerJex, or (iii) if the
Change of Control is the result of a bona fide public offering of EnerJex’s
securities or other form of capital raising transaction conducted by EnerJex or
its assigns within twelve (12) months from the date of this Agreement; other
than the public offering on Form S-1 originally filed with the Securities and
Exchange Commission on or about April 9, 2008.
8.
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COVENANT
TO NOT COMPETE AND NON-SOLICITATION.
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8.1
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If
Termination is for Cause. If Cochennet is
terminated for Cause, Cochennet shall not, directly or indirectly, either
during the Term or for a period of twenty-four (24) months thereafter,
engage in any Competitive Business (as defined below), or any
energy-related business, in the mid-continent region (Kansas, Missouri,
North Texas, Oklahoma, Wyoming, Montana, Nebraska and Arkansas) of the
United States; provided, however, that the ownership of less than five
percent (5%) of the outstanding capital stock of a corporation whose
shares are traded on a national securities exchange or on the
over-the-counter market or the ownership shall not be deemed engaging any
Competitive Business. “Competitive Business” shall mean the oil and
natural gas industry, including oil and gas leasing, drilling, and other
operations, syndication and marketing of partnership or other investments
related to oil and natural gas operations, or any other business
activities that are the same as
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9
or
similar to EnerJex’s concept as it exists on the Effective Date or on the
Termination Date.
8.2
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If
Cochennet Resigns for “Good Reason” or is Terminated Without
Cause. If
Cochennet resigns for “Good Reason” or Cochennet is terminated without
Cause, Cochennet shall not be restricted under any non-compete provision
of this Agreement other than Section 8.3, which will remain in force for
eighteen (18) months.
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8.3
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Non-Solicitation;
Agreement not to Hire/be Hired. Cochennet understands
and appreciates that EnerJex invests a tremendous amount of time, energy,
resources and expertise in the training and education of its employees to
be able to operate its operations. Further, Cochennet understands that in
the event an employee of EnerJex, or any of its operating subsidiaries, is
enticed to leave, then EnerJex shall be damaged in an amount the Parties
are not capable of calculating at the present time. Therefore, Cochennet
agrees, that during any non-compete period set forth under Section 8.1
above, that he will not offer employment or contractor status to any
employee or contractor or affiliated person of EnerJex, or accept
employment or contractor status from any employee or contractor or
affiliated person of EnerJex; or its operating subsidiaries, nor to allow
any person or entity affiliated with Cochennet to offer such employment
status with Cochennet or any other concern, venture or entity with whom
Cochennet may be employed by, associated or hold a more than five percent
(5%) ownership position in.
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9.
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TRADE SECRETS AND
CONFIDENTIALITY:
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9.1
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Nondisclosure. Without the prior
written consent of EnerJex, Cochennet shall not, at any time, either
during or after the term of this Agreement, directly or indirectly,
divulge or disclose to any person, firm, association, or corporation, or
use for Cochennet’s own benefit, gain, or otherwise, any customer lists,
plans, products, data, results of tests and data, or any other trade
secrets or confidential materials or like information (collectively
referred to as the “Confidential Information”) of EnerJex and/or its
Affiliates, as hereinafter defined, it being the intent of EnerJex, with
which intent Cochennet hereby agrees, to restrict Cochennet from
disseminating or using any like information that is unpublished or not
readily available to the general
public.
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Definition of Affiliate. For
purposes of this Agreement, the term “Affiliate” shall mean any entity,
individual, firm, or corporation, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with
EnerJex.
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9.2
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Notice
of Compelled Disclosure. If, at any time,
Cochennet becomes legally compelled (by deposition, interrogatory, request
for documents, subpoena, civil investigative demand, or similar process or
otherwise) to disclose any of the Confidential Information, Cochennet
shall provide EnerJex with prompt, prior written notice of such
requirement so that EnerJex may seek a protective order or other
appropriate remedy and/or waive compliance with the terms of this
Agreement. In the event that such protective order or other remedy is not
obtained, that EnerJex waives compliance with the provisions hereof,
Cochennet agrees to furnish only that portion of the Confidential
Information which Cochennet is advised by written opinion of counsel is
legally required and exercise Cochennet’s best efforts to obtain assurance
that confidential treatment will be accorded such Confidential
Information. In any event, Cochennet shall not oppose action by EnerJex to
obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the Confidential
Information.
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9.3
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Assurance
of Compliance. Cochennet agrees to
represent to EnerJex, in writing, at any time that EnerJex so request,
that Cochennet has complied with the provisions of this section, or any
other section of this Agreement.
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10.
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INDEMNIFICATION
OF COCHENNET: EnerJex shall, to the
maximum extent permitted by law, indemnify and hold Cochennet harmless
against expenses, including reasonable attorney’s fees, judgments, fines,
settlement, and other amounts actually and reasonably incurred in
connection with any proceeding arising by reason of Cochennet’s employment
by EnerJex. Further, EnerJex shall advance to Cochennet any expense
incurred in defending such proceeding to the maximum extent permitted by
law.
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11.
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RETURN
OF ENERJEX PROPERTY: Cochennet agrees that
upon any termination of his employment, Cochennet shall return to EnerJex
within a reasonable time not to exceed forty-eight (48) hours, any of
EnerJex’s property in his possession or under his control, including but
not limited to, all lists, books, records, data, and other information
(including all copies thereof in whatever form or media) of every kind
relating to or connected with EnerJex or its Affiliates and their
activities, business and customers, computer/office automation equipment,
records and names, addresses, and other information with regard to
customers or potential customers of EnerJex with whom Cochennet has had
contact or done business.
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12.
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RELATIONSHIP
OF PARTIES:
The parties intend that this Agreement create an Employee-Employer
relationship between the parties.
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13.
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NOTICES: All
notices, required and demands and other communications hereunder must be
in writing and shall be deemed to have been duly given
when
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11
personally
delivered or when placed in the United States Mail and forwarded by Registered
or Certified Mail, Return Receipt Requested, postage prepaid, or when forwarded
via reputable overnight carrier, addressed to the party to whom such notices is
being given at the following address:
As to
EnerJex: EnerJex
Resources, Inc.
0000 X.
000xx, 0xx
Xxxxx
Xxxxxxxx
Xxxx, Xxxxxx 00000
Attn:
Chairman of the Governance, Compensation and Nominating Committee of the Board
of Directors
with copy
to: Husch
Xxxxxxxxx Xxxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx
0000
Xxxxxx Xxxx,
XX 00000
Attn: Xxxxxxx X. Xxxxxxx,
Partner
As to
Cochennet: C.
Xxxxxxx Xxxxxxxxx
00000 XX Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Address Change: Any party may
change the address(es) at which notices to it or him, as the case may be, are to
be sent by giving the notice of such change to the other parties in accordance
with this Section
13.
14. MISCELLANEOUS:
14.1
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Entire
Agreement. This
Agreement and the Addendums hereto contain the entire agreement of the
parties. This Agreement may not be altered, amended or modified
except in writing duly executed by the
parties.
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14.2
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Assignment. Neither
party, without the written consent of the other party, can assign this
Agreement.
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14.3
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Binding. This
Agreement shall be binding upon and inure to the benefit of the parties,
their personal representative, successors and
assigns.
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14.4
|
No
Waiver. The waiver
of the breach of any covenant or condition herein shall in no way operate
as a continuing or permanent waiver of the same or similar covenant or
condition. Any waiver must be in writing and signed by the
party granting the waiver.
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14.5
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Severability. If any
provision of this Agreement is held to be invalid or unenforceable for any
reason, the remaining provisions will continue in full force without being
impaired or invalidated in any way. The parties hereto agree to
replace any invalid provision with a valid provision which most closely
approximates the intent of the invalid
provision.
|
12
14.6
|
Interpretation. This
Agreement shall not be construed more strongly against any party hereto
regardless of which party may have been more responsible for the
preparation of Agreement.
|
14.7
|
Governing
Law. This
Agreement shall be governed by and construed under the laws of the State
of Kansas, without reference to the choice of law principles
thereof.
|
14.8
|
Arbitration.
|
14.8.1
|
Any
controversy, dispute or claim of whatever nature in any way arising out of
or relating to Cochennet’s employment with EnerJex, including, without
limitation (except as expressly excluded below in Section 14.8.2)
any claims or disputes by Cochennet against EnerJex, or by EnerJex against
Cochennet, concerning, arising out of or relating to the separation of
that employment; any other adverse personnel action by EnerJex; any
federal, state or local law, statute or regulation prohibiting employment
discrimination or harassment; any public policy; any EnerJex disciplinary
action; any EnerJex decision regarding a EnerJex policy or practice,
including but not limited to Cochennet’s compensation or other benefits;
and any other claim for personal, emotional, physical or economic injury
(individually or collectively, “Covered
Claims”) shall be resolved, at the request of any party to this
Agreement, by final and binding arbitration in Kansas City, Missouri
before Judicial Arbitration Mediation Services (“JAMS”) in
accordance with JAMS’ then-current policies and procedures for arbitration
of employment disputes.
|
14.8.2
|
The
only claims or disputes excluded from binding arbitration under this
Agreement are the following: any claim by Cochennet for workers’
compensation benefits or for benefits under a EnerJex plan that provides
its own arbitration procedure; and any claim by either party for equitable
relief, including but not limited to, a temporary restraining order,
preliminary injunction or permanent injunction against the other
party.
|
14.8.3
|
This
agreement to submit all Covered Claims to binding arbitration in no way
alters the exclusivity of Cochennet’s remedy under Section 6.5 in
the event of any termination without Cause or the exclusivity of
Cochennet’s remedy under Section 6.4
in the event of any termination with Cause, and does not require EnerJex
to provide Cochennet with any type of progressive
discipline.
|
13
14.9
|
Taxes. EnerJex
is authorized to withhold from any payment or benefit provided hereunder,
the amount of withholding taxes due any federal, state or local authority
in respect of such benefit or payment and to take such other action as may
be necessary in the opinion of EnerJex to satisfy all obligations for the
payment of such withholding taxes. In the event EnerJex does
not make such deductions or withholdings, Cochennet shall indemnify
EnerJex for any amounts paid with respect to any such taxes, together with
any interest, penalties and related expenses thereto. Cochennet
acknowledges that no oral or written representation of fact or opinion has
been made to him by EnerJex or its attorneys regarding the tax treatment
or consequences of any payment made under this
Agreement. Cochennet acknowledges and agrees that to the extent
any liability or responsibility exists for Cochennet’s federal, state and
local income or other taxes, such liability or responsibility rests solely
with him. Cochennet further agrees to indemnify and hold harmless EnerJex
in connection with any liability incurred by EnerJex in connection with
any tax or taxes for which Cochennet is
responsible.
|
14.10
|
Section
409A of the Internal Revenue Code. To the extent
applicable, this Agreement shall be interpreted, construed and operated in
accordance with the Section 409A of the Internal Revenue Code, and the
Treasury regulations and other guidance issued thereunder. Any
reference to termination of employment, severance from employment or
similar terms shall mean and be interpreted as a “separation from service”
as defined (as defined in Treasury Regulation §1.409A-1(h)). If
on the date of Cochennet’s separation from service with EnerJex Cochennet
is a specified employee (as defined in Code Section 409A and Treasury
Regulation §1.409A-1(i)), no payment constituting the “deferral
of compensation” within the meaning of Treasury Regulation §1.409A-1(b)
and after application of the exemptions provided in Treasury Regulation
§§1.409A-1(b)(4) and 1.409A-1(b)(9)(iii) shall be made to Cochennet at any
time during the six (6) month period following Cochennet’s separation from
service, and any such amounts shall instead be paid in a lump sum on the
first payroll payment date following expiration of such six (6) month
period. Any obligation of EnerJex to reimburse Cochennet for
expenses incurred during any taxable year of Cochennet shall not affect
the expenses eligible for reimbursements in any other taxable
year. Further, such reimbursement of expenses shall be made on
or before the last day of Cochennet’s taxable year following the taxable
year in which the expense was
incurred.
|
14.11
|
Titles. Titles to
the sections of this Agreement are solely for the convenience of the
parties and shall not be used to explain, modify, simplify, or aid in the
interpretation of the provisions of this
Agreement.
|
14
14.12
|
Counterparts. This
Agreement may be executed in counterparts, each of which shall be deemed
an original, but together which shall constitute one and the same
instrument.
|
14.13
|
IN WITNESS WHEREOF, the
parties have executed this Agreement as of the day and year first written
above.
EnerJex: EnerJex Resources, Inc.
a Nevada
corporation
By: /s/ Xxxxxx X.
Xxxxxx
Xxxxxx X.
Xxxxxx, Chairman Governance, Compensation and Nominating Committee of the Board
of Directors
Cochennet:
By: /s/ C. Xxxxxxx
Xxxxxxxxx
C.
Xxxxxxx Xxxxxxxxx
15
ADDENDUM
A
PRESIDENT
& CHIEF EXECUTIVE OFFICER INCENTIVE COMPENSATION PLAN
This
President and Chief Executive Officer Incentive Compensation Plan (this “Plan”) is entered
into this 1st day of
August, 2008, by and between EnerJex Resources, Inc., a
Nevada corporation (“EnerJex”), and C. Xxxxxxx Xxxxxxxxx (“Cochennet”), as
follows:
WHEREAS, it is in the best
interest of EnerJex and Cochennet to enter into a continuing arrangement to
cover annual incentive and long-term bonuses, and
WHEREAS, both parties to this
Plan desire to memorialize various aspects of their relationship:
NOW,
THEREFORE, the parties hereby agree as follows:
1. Addendum. This Plan is in an addendum
to that certain Employment Agreement effective of even date
herewith.
2. Annual
Incentive Plan; Restricted Stock Opportunity. Cochennet shall be entitled
to participate in an annual incentive bonus plan with a maximum potential amount
of up to 100% of Cochennet’s base salary in effect at the commencement of each
fiscal year. At the discretion of the GCNC, the annual incentive
bonus for each fiscal year will be paid in cash or shares of EnerJex’s common
stock pursuant to a Restricted Stock Plan that EnerJex contemplates asking the
shareholders to approve at the 2008 annual meeting. Fifty percent
(50%) of the annual bonus shall be earned upon the obtainment of mutually
acceptable yearly business goals determined by Cochennet and the Governance,
Compensation and Nominating Committee (“GCNC”) within thirty (30) days following
the commencement of each fiscal year (or with respect to the 2009 fiscal year,
within thirty (30) days following the date of this Plan). The remaining fifty
percent (50%) of the bonus shall be subject to the Annual Incentive Elements
below.
Annual Incentive
Elements:
35%
|
PDP
Net Reserve Growth (BOE) greater than 25% as determined by third party
engineering firm from previous FY end levels
|
35%
|
Year
over Year net production increase (BOPDE sold) greater than 25% - FYE
3/31/09 will use FYE 3/31/08 Q4 annualized as basis
|
15%
|
Year
over Year XXX Cost must show decrease on BOPDE sold basis - FYE 3/31/09
will use FYE 3/31/08 Q4 annualized as basis
|
15%
|
EJXR
share price must increase by more than 100% from previous FYE
level
|
Timing of Incentive
Payout:
The annual incentive bonus shall be
paid in accordance with the following:
16
50%
|
of
Cochennet’s total annual incentive bonus will be paid on 6/30 following
the end of the fiscal year to which such bonus relate. For
example, 50% of the 2009 fiscal year annual incentive bonus will be paid
on 6/30/09.
|
25%
|
of
Cochennet’s total annual incentive bonus will be paid on the first
anniversary of the initial payment date. For example, 25%
of the 2009 fiscal year annual incentive bonus will be paid on
6/30/10.
|
25%
|
of
Cochennet’s total annual incentive bonus will be paid on the second
anniversary of the initial payment date. For example, 25%
of the 2009 fiscal year annual incentive bonus will be paid on
6/30/11.
|
For
instance, the Plan is setup such that by 6/30/11 Cochennet is receiving in
effect a collective 100% of the fiscal 2009 bonus that he earned.
Notwithstanding the foregoing,
Cochennet’s entitlement to annual incentive bonus shall be subject to the
following conditions:
·
|
Net
Cash Flow from operations must be sufficient to pay the full incentive
amount owed under the Plan (not just the current year’s
portion);
|
·
|
If
Cochennet terminates employment prior to the full payment date of any
annual incentive bonus, then any unpaid bonus compensation shall be
forfeited except as provided under Cochennet’s Employment Agreement in the
event of death, disability, voluntary termination for good reason, or
involuntary termination without
cause.
|
3.
|
Long-Term
Incentives.
|
3.1
|
Stock
Option Grants. Subject to Section
3.2, Cochennet shall be eligible to receive up to one hundred thirty five
thousand (135,000) options to purchase EnerJex’s common stock pursuant to
the EnerJex Resources, Inc. Stock Option Plan, as amended from time to
time, or any successor plan, in accordance with the
following:
|
Fiscal
Year
|
Grant
Date
|
Maximum # of Options
|
Strike Price of Options
|
Option Expiration Date*
|
2009
|
7/01/09
|
30,000
|
FMV
on Grant Date
|
6/30/12
|
2010
|
7/01/10
|
45,000
|
FMV
on Grant Date
|
6/30/13
|
2011
|
7/01/11
|
60,000
|
FMV
on Grant Date
|
6/30/14
|
|
*The
options shall be immediately vested and exercisable from the grant date
through the option expiration date.
|
3.2 Performance
Conditions. The number of stock options granted each fiscal
year shall be based upon the following schedule and will be pro rated if actual
performance
17
does
not equal or exceed 100% of the targeted performance
conditions. Cochennet must be employed on the grant date to receive
the stock options.
Fiscal
2009
|
Target
|
|
40%
|
PDP
Net Reserve Growth (BOE) at 3/31/09 greater than 35% over 3/31/08 levels,
as determined by third party engineering firm
|
|
30%
|
Year
over Year net production increase (BOPDE sold) by 35% - FYE 3/31/09 will
use FYE 3/31/08 Q4 annualized as its starting basis
|
|
30%
|
EJXR
share price must increase over the share price level at date of execution
of this agreement. The share price must be $11.00 on 3/31/09 to
meet this goal.
|
|
Fiscal
2010
|
Target
|
|
40%
|
PDP
Net Reserve Growth (BOE) at 3/31/10 greater than 35% over 3/31/09 levels,
as determined by third party engineering firm
|
|
30%
|
Year
over Year net production increase (BOPDE sold) by 35% - FYE 3/31/10 will
use FYE 3/31/09 Q4 annualized as its starting basis
|
|
30%
|
EJXR
share price must increase over the targeted 3/31/09 share price
level. The share price must be $16.85 on 3/31/10 to meet this
goal.
|
|
Fiscal
2011
|
Target
|
|
40%
|
PDP
Net Reserve Growth (BOE) at 3/31/11 greater than 35% over 3/31/10 levels,
as determined by third party engineering firm
|
|
30%
|
Year
over Year net production increase (BOPDE sold) by 35% - FYE 3/31/11 will
use FYE 3/31/10 Q4 annualized as its starting basis
|
|
30%
|
EJXR
share price must increase over the targeted 3/31/10 share price
level. The share price must be $22.55 on 3/31/11 to meet this
goal.
|
The
maximum number of options available to be earned each year is subject to
“catch-up”; i.e.- if an element in year one is missed, it may be “caught-up” in
year two, so long as the cumulative goal is met. Any catch-up options
will be granted at the then current year price.
In the
event of any reorganization, recapitalization, reclassification, stock split,
stock dividend, distribution, combination of shares, merger, consolidation,
rights offering, or any other changes in the corporate structure or shares of
EnerJex, appropriate adjustments shall be made by the GCNC in its
discretion.
18
4. Review of
Annual and Incentive Compensation by Independent Third Party. The GCNC has engaged an
independent compensation consultant to review EnerJex’s corporate compensation,
including annual and long-term incentive plans, and has assisted the GCNC in
establishing a reasonable and suitable compensation structure for EnerJex and
its operating subsidiaries. Cochennet acknowledges that with or
without any additional independent compensation consultation, the GCNC may
adjust the annual and long-term incentives granted under this Plan.
5. Nontransferability
of Rights. Prior
to such time that any payment under the Plan is made to Cochennet, any rights
under the Plan shall not be transferred, assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment, or similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any right under the Plan, or upon
the levy of any attachment or similar process upon the Plan, the benefits
granted herein (that have not been paid) shall immediately be
forfeited.
6. Board
Authority. Any
questions concerning the interpretation of this Plan and any controversy which
arises under this Plan shall be settled by the EnerJex Board of Directors in its
sole discretion.
7. Binding
Effect. This Plan
shall bind, and, except as specifically provided herein, shall inure to the
benefit of the respective heirs, legal representatives, successors and assigns
of the parties hereto.
8. Governing
Law. This Award
Plan and the rights of all persons claiming hereunder shall be construed and
determined in accordance with the laws of the State of Kansas.
IN WITNESS WHEREOF, EnerJex
has caused this Plan to be executed and Cochennet has hereunto set his hand
effective the day and year first above written.
EnerJex:
ENERJEX RESOURCES, INC.
a Nevada
corporation
By: /s/ Xxxxxx X.
Xxxxxx
Xxxxxx X.
Xxxxxx, Chairman
Governance,
Compensation and Nominating
Committee
of the Board of Directors
Cochennet:
By: /s/ C. Xxxxxxx
Xxxxxxxxx
C. Xxxxxxx Xxxxxxxxx
19
ADDENDUM
B
Job
Description for C. Xxxxxxx Xxxxxxxxx
Job
Title: President
& Chief Executive Officer
Department: Executive
Reports
To: Board
of Directors
SUMMARY
The
President and Chief Executive Officer (“CEO”) has primary responsibility for
planning, organizing, staffing, and operating EnerJex Resources, Inc.
(“EnerJex”) toward its primary objectives, based on profit and return on
capital, and is accountable to the Board of Directors for the results of
performance of all employees.
The
President and CEO establishes and communicates the management style, corporate
culture, business philosophy and ethical values by which EnerJex will
operate.
The
President and CEO manages and directs EnerJex by performing the following duties
personally or through subordinate officers or managers.
ESSENTIAL DUTIES AND
RESPONSIBILITIES include the following. Other duties may be
assigned.
·
|
Plans
the overall business strategy and goals of EnerJex designed to provide a
return on stockholder investment and establishes objectives for each
function to meet those goals, with the cooperation of the Board of
Directors.
|
·
|
Use
all reasonable efforts and business judgment to prevent defaults from
occurring under any financing or other
agreements.
|
·
|
Oversees
the operation of EnerJex through EnerJex’s officers and
managers.
|
·
|
Oversees
that EnerJex is operated in accordance with EnerJex’s Code of Ethics and
within its Corporate Governance
Guidelines.
|
·
|
Assists
in developing and presenting an annual business plan and budget, for
EnerJex’s operations, to the Board of
Directors.
|
·
|
Establishes
current and long range goals, objectives, plans and policies, subject to
approval by the Board of Directors.
|
·
|
Determines
the appropriate organization structure and staffing responsibilities
required to meet EnerJex’s objectives. Dispenses advice,
guidance, direction, and authorization to carry out major plans, standards
and procedures, consistent with established policies and Board
approval.
|
20
·
|
Meets
with EnerJex’s executives to ensure that operations are being executed in
accordance with the EnerJex’s
policies.
|
·
|
Oversees
the adequacy and soundness of the EnerJex’s financial structure with
EnerJex principal financial officer and audit
committee.
|
·
|
Reviews
operating results of EnerJex, compares them to established objectives, and
takes steps to use his best efforts to ensure appropriate measures are
taken to correct unsatisfactory
results.
|
·
|
Oversees
the preparation and filing of all SEC reports and filings, using his best
efforts to ensure timely and accurate filing of all SEC reports and
filings..
|
·
|
Plans
and directs all investigations and negotiations pertaining to mergers,
joint ventures, the acquisition of businesses, or the sale of major assets
with approval of the Board of
Directors.
|
·
|
Establishes
and maintains an effective system of communications throughout
EnerJex.
|
·
|
Fulfills
responsibility to the Board of Directors to inform or seek approval for
significant matters such as financing, capital expenditures, and
appointment of officers. In accordance to Board
guidelines.
|
·
|
Utilizes
legal counsel and other professionals in a manner designed to ensure that
EnerJex business transactions are conducted in accordance with prevailing
legal and regulatory requirements.
|
·
|
Reviews
and determines approval of all recommendations for compensation of
employees, managers and employees.
|
·
|
Presides
over stockholders meetings.
|
·
|
Represents
EnerJex with major customers, stockholders, the financial community, the
SEC, the Kansas Corporations Commission and the
public.
|
·
|
Plans
and develops public relations policies designed to improve EnerJex's image
and relations with customers, employees, stockholders, and
public.
|
·
|
Evaluates
performance of executives for compliance with established policies and
objectives of EnerJex and contributions in attaining
objectives.
|
21
ADDENDUM
C
Approved
Non-EnerJex Resources, Inc. Business Activity Exemptions
Description of Business
Activity
1.
|
Executive
Officer, Director and 100% stockholder of CSC Group, a private consulting
firm which includes referral agreements with Strategic Partner’s Group,
Utilx, TBG Financial and DST.
|
22