EXHIBIT 10.23
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement ("Agreement") is made this 28th day of December,
2001 (the "Agreement Date") between the following parties ("Parties"):
(i) PetroCorp Incorporated., a Texas corporation ("PetroCorp");
and,
(ii) Xxxxxxx X. Xxxxxx, an individual residing in Tulsa, Oklahoma
(the "Executive").
PetroCorp and Executive, in consideration of the promises and covenants set
forth herein (the receipt and adequacy of which are hereby acknowledged) and
intending to be legally bound hereby, agree as follows:
(1) PURPOSE OF THIS AGREEMENT. The purpose of this agreement is as follows:
(a) PetroCorp is a Texas corporation engaged in the oil and gas business
in the Continental United States, Canada and Ecuador.
(b) The Executive is currently serving as Executive Vice President and
Manager of Operations and Engineering for PetroCorp Incorporated
pursuant to a management agreement between PetroCorp and Xxxxxx-
Xxxxxxx Oil Company by which Executive is currently employed.
(c) PetroCorp and Executive desire that Executive become a direct
employee of PetroCorp.
(d) The purpose of this Agreement is to set forth the terms and conditions
on which PetroCorp shall, as of the Commencement (as hereafter
defined), employ the Executive.
(2) EMPLOYMENT. PetroCorp hereby employs the Executive, and the Executive
hereby agrees to work for PetroCorp, on the following terms and conditions:
(a) Executive shall serve as Executive Vice President and Manager of
Operations and Engineering for PetroCorp.
(b) Executive shall devote usual and customary office hours and all time
and attention reasonably necessary to the affairs of PetroCorp.
Executive shall serve PetroCorp diligently, loyally, and to the best
of his ability.
(c) Executive shall serve in such other or additional positions as an
officer and/or director of PetroCorp or any of its affiliates as the
Board of
Directors of PetroCorp shall request; provided, however,
Executive's residence and place of work shall remain in Tulsa,
Oklahoma.
(d) Notwithstanding anything herein to the contrary, Executive shall not
be precluded from (i) engaging in any charitable, civic, political or
community activity or membership in any professional organization and
(ii)continuing to engage in oil and gas activities for his own benefit
consistent with past practice to the extent such service does not
create a conflict of interest with PetroCorp.
(3) COMPENSATION. As the sole, full and complete compensation to the Executive
for the performance of all duties of Executive under this Agreement and for
all services rendered by Executive to PetroCorp or to any affiliate of
PetroCorp:
(a) PetroCorp shall pay to Executive the sum of $ per year payable in
installments in arrears, less usual and customary payroll deductions
for FICA, federal and state withholding, and the like, at the times
and in the manner in effect in accordance with the usual and customary
payroll policies generally in effect from time to time at PetroCorp
("Annual Salary"). The Annual Salary may be increased during the Term
(as hereafter defined), but shall not be decreased.
(b) PetroCorp shall pay directly reasonable and customary employee
benefits including medical and health, dental, life, and disability
insurance, subject to approval by the Compensation Committee of the
Board of Directors of PetroCorp which approval shall not be
unreasonably withheld, delayed or denied.
(c) PetroCorp shall pay $ per year, as an additional retirement benefit.
(d) PetroCorp shall pay Executive the Annual Incentive Bonus (as hereafter
defined) and the Severance Payment (as hereafter defined). PetroCorp
may,
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from time to time in PetroCorp's sole discretion, pay or provide, or
agree to pay or provide, Executive a bonus, stock option, or other
incentive or performance based compensation in addition to the Annual
Incentive Bonus and the Severance Payment. All bonus, stock option and
incentive or performance based compensation described in this
subparagraph, including the Annual Incentive Bonus and the Severance
Payment shall not, regardless of its nature, constitute Annual Salary.
(e) PetroCorp shall reimburse Executive for reasonable and necessary
entertainment, travel and other expenses incurred in connection with
the business of PetroCorp, subject to audit by the Compensation
Committee of the Board of Directors of PetroCorp which approval shall
not be unreasonably withheld, delayed or denied.
(f) The Executive shall be allowed four weeks vacation, with the ability
to be compensated for up to ten days of such vacation in lieu of
taking the vacation, and usual and customary holidays.
(g) Executive hereby agrees to accept the foregoing compensation as the
sole, full and complete compensation to Executive for the performance
of all duties of Executive under this Agreement and for all services
rendered by Executive to PetroCorp or any affiliate of PetroCorp.
(4) TERM OF THIS AGREEMENT. The term of this Agreement (the "Term") shall
commence (the "Commencement") as of the first day of January 2002 and shall
terminate on the third anniversary date of the Commencement; provided,
however, this Agreement shall terminate in the event PetroCorp consummates
a Business Combination Transaction (as hereafter defined) in which event
the effective date of termination shall be such date as is mutually agreed
between Executive and PetroCorp, but in no event later than the first day
of the third full calendar month following the month in which the Business
Combination Transaction is consummated.
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(5) TERMINATION OF THIS AGREEMENT. Notwithstanding the provisions of
paragraph 4 of this Agreement, this Agreement may be terminated as follows:
(a) PetroCorp may terminate this Agreement for cause on the following
terms and conditions:
(A) PetroCorp shall be deemed to have cause to terminate Executive's
employment only in, but only in, one of the following events:
(1) The Executive shall materially fail to perform his
obligations under this Agreement (it being understood that
any such failure resulting from Executive's incapacity due to
physical or mental illness shall not be deemed willful);
(2) The Executive commits any act which is intended by Executive
to materially injure PetroCorp;
(3) The Executive commits any criminal act or any act involving
moral turpitude;
(4) The Executive commits any dishonest or fraudulent act; or,
(5) Any refusal by Executive to obey orders or instructions of
the Board of Directors of PetroCorp unless such instructions
would require Executive to commit an illegal act, could
subject Executive to personal liability, would require
Executive to violate the terms of this Agreement, or would
otherwise be inconsistent with any duties imposed upon
Executive by law or regulation.
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(B) PetroCorp shall be deemed to have cause to terminate Executive's
employment only when a majority of the members of the Board of
Directors of PetroCorp finds that, in the good faith opinion of
such majority, the Executive committed one or more of the acts
set forth in clauses (1) through (5) of the preceding
subparagraph, such finding to have been made after at least ten
(10) business days notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard, for such
period of time and at such place and time as the Board of
Directors in its discretion shall determine, before such
majority. The determination of such majority, made as set forth
above, shall be binding upon PetroCorp and the Executive.
(C) The effective date of a termination for cause shall be the date
of the action of such majority finding the termination was with
cause. In the event PetroCorp terminates this Agreement for
cause, (A) PetroCorp shall pay Executive the Executive's then
Annual Salary through, but not beyond, the effective date of the
termination and (B) the Executive shall receive those other
benefits described in Paragraph 3 of this Agreement through but
not beyond the effective date of such termination.
(a) The Executive may, at any time after the first anniversary date of
this Agreement, terminate this Agreement on the following terms and
conditions:
(A) The Executive may give written notice of termination to
PetroCorp. The termination shall be effective on the twentieth
(20th) business day following the notice of termination.
(B) Upon termination by the Executive, PetroCorp shall have no
obligation to Executive under this Agreement except to pay
Executive Annual Salary and benefits up to the effective date of
the termination.
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(6) ANNUAL INCENTIVE BONUS. PetroCorp shall pay Executive a bonus on the
following terms and conditions (the "Annual Incentive Bonus"):
(a) The Annual Incentive Bonus shall be paid by PetroCorp corporate check
in United States Dollars (or in PetroCorp Common Stock valued in
accordance with Paragraph 6j, at the option of the Executive), at the
discretion of the Executive) on or before the 45/th/ calendar day
following the termination of the full or partial year in respect of
which the Annual Incentive Bonus is being calculated.
(b) The Annual Incentive Bonus shall be not more than 50 percent of Annual
Salary.
(c) The Annual Incentive Bonus shall be the sum of the following four
amounts:
(A) Reserve Growth Per Share Bonus;
(B) EBITDA Growth Bonus;
(C) Stock Price Growth Bonus; and,
(D) Discretionary Bonus.
(d) The Reserve Growth Per Share Bonus shall equal (i) Annual Salary at
the end of the year times (ii) 0.25 times (iii) a fraction the
numerator of which is PetroCorp Reserves (as hereafter defined)
calculated in mcf equivalents (with oil converted to mcfs at the ratio
of one bbl oil equals six mcf of natural gas) at the end of such year
divided by the number of shares of PetroCorp Common Stock outstanding
at the end of such year and the denominator of which is PetroCorp
Reserves at the start of such year divided by the number of shares of
PetroCorp Common Stock outstanding at the start of such year, minus
1.0; provided such fraction shall not be less than 1.0 nor more than
1.5; and provided further if the fraction is less than one, the
Reserve Growth Per Share Bonus shall be zero.
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(e) The EBITDA Growth Bonus shall equal (i) Annual Salary at the end of
the year times (ii) 0.25 times (iii) a fraction the numerator is the
EBITA Per Share (as hereafter defined) at the end of such year and the
denominator is the EBITDA per share at the start of such year, minus
1.0; provided such fraction shall not be less than 1 nor more that
1.5; and provided further if the fraction is less than one, the EBITDA
Growth Bonus shall be zero.
(f) The Per Share Stock Price Bonus shall equal (i) Annual Salary at the
end of the year times (ii) 0.25 times (iii) Per Share Stock Price (as
hereafter defined) at the end of such year and the denominator is the
Per Share Stock Price at the start of such year, minus 1.0; provided
such fraction shall not be less than 1.0 nor more than 1.5; ; and
provided further if the fraction is less than one, the Stock Price
Bonus shall be zero.
(g) The Discretionary Bonus shall be such amount, not exceeding 0.25 times
Annual Salary as the Compensation Committee of the Board of Directors
of PetroCorp shall, in its sole discretion, determine is appropriate.
(h) As used herein, PetroCorp Reserves means Proved Oil and Gas Reserves
determined in the annual reserve reports of PetroCorp prepared in the
ordinary course of business using reserve determination methodologies
consistent with prior practice and stated in MCF equivalents,
converting oil to natural gas at a 6:1 ratio; provided, however:
(A) In the event of the disposition of reserves during the year, the
amount of reserves sold during such year shall be deducted in
determining the PetroCorp Reserves at the start of such year;
(B) In determining reserves at the end of the year, the same pricing,
cost, and discount rate assumptions shall be utilized as were
utilized in determining reserves at the beginning of such year in
the reserve report prepared by PetroCorp in the
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ordinary course of business as hereafter provided in Clause (C);
and,
(C) For purposes of determining PetroCorp Reserves, the reserve report
of PetroCorp prepared annually in the ordinary course of business
immediately preceding the date of determination shall be utilized
with the adjustments provided in the preceding subparagraphs.
(i) As used herein, EBITDA per share means earnings before interest,
taxes, depreciation and amortization Per Share, determined in
accordance with the financial statements of PetroCorp included in SEC
Forms 10K as filed with the Securities and Exchange Commission for the
year ending immediately preceding the start and immediately preceding
the end of the year.
(j) As used herein, the Per Share Stock Price shall be the average of the
closing prices for PetroCorp Common Stock on the American Stock
Exchange on the sixty (60) trading days on which at least one trade
actually occurs immediately preceding the date as of which the
determination of the Stock Price is being made. If there are any
changes in the capitalization of PetroCorp affecting the number or
kind (after the recapitalization) of issued and outstanding shares of
PetroCorp Common Stock (existing immediately prior to the change in
capitalization), whether such changes have been occasioned by
reorganization, combination of shares, declaration of stock dividends,
stock splits, reverse stock splits, reclassification or
recapitalization of such stock, the merger or consolidation of
PetroCorp with some other corporation or other similar transaction,
then the number and kind of shares and the price to be paid therefor,
shall be appropriately adjusted.
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(k) Attached hereto are hypothetical examples of the application of the
foregoing provisions.
(7) Severance Payment. In the event of a Business Combination Transaction (as
hereafter defined), PetroCorp shall pay the Severance Payment (determined
as hereafter provided) to Executive on the following terms and conditions:
(a) The liquidation of PetroCorp;
(b) The sale of all or substantially all of the assets of PetroCorp;
(c) A merger, consolidation, asset acquisition in exchange for shares,
share exchange, or other comparable transaction in which PetroCorp is
not deemed the acquirer in accordance with FASB # 141; or,
(d) A merger, consolidation, asset acquisition in exchange for shares,
share exchange, or comparable transaction in which the shareholders of
PetroCorp immediately prior to the consummation of the transaction own
less than 50% of the voting securities of PetroCorp or the surviving
corporation immediately following consummation of the transaction.
(e) The Severance Payment shall be determined as follows:
(A) The Severance Payment shall be paid contemporaneously with the
consummation of the Business Combination Transaction.
(B) The Severance Payment shall be paid in PetroCorp Common Stock,
the same capital stock which holders of PetroCorp Common Stock
receive in the Business Combination Transaction. For this
purpose, as applicable, (i) the value of PetroCorp Common Stock
shall be determined in accordance with Paragraph 6j as of the
date of consummation of the Business Transaction combination and
(ii) capital stock which holders of PetroCorp Common Stock
receive shall be valued as of the date of consummation of the
Business
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Combination Transaction, as near as may reasonably be done with
such changes as are reasonably required to accommodate the
circumstances, in the same manner as is provided for in Paragraph
6j for PetroCorp Common Stock.
(C) The amount of the Severance Payment shall be determined in
accordance with the following formula, not to exceed five times
Annual Salary:
SP = [AS][4(TV/PC) - 3]
Where:
SP = Severance Payment
AS = Annual Salary at the date of consummation of the
Business Transaction Combination
TV = Transaction Value (as hereafter defined)
PC = PetroCorp Value (as hereafter defined)
(1) PetroCorp Value shall be the PetroCorp Per Share Stock Price
determined in accordance with Paragraph 6j as of the date
the proposed Business Combination Transaction first becomes
publicly known.
(2) Transaction Value shall be:
(1) In the event the transaction is the sale of all or
substantially all of the assets of PetroCorp, the fair
market value per share of PetroCorp Common Stock of all
cash, securities, and other assets paid to PetroCorp in
the Business Combination Transaction determined as of
the date the proposed
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Business Combination first becomes publicly known, less
all liabilities.
(2) In the event the transaction is a share exchange, the
value per share of PetroCorp Common Stock of the
capital stock received by the holders of PetroCorp
Common Stock, determined, as of the date the proposed
Business Combination first becomes publicly known as
near as may reasonably be done with such changes as are
reasonably required to accommodate the circumstances,
in the same manner as is provided for in Paragraph 6j
for PetroCorp Common Stock plus the value per share of
PetroCorp Common Stock of any cash or other assets
received.
(3) In the event the transaction is a transaction in which
PetroCorp acquires the assets of another, the value per
share of PetroCorp Common Stock of all cash,
securities, and other assets paid by PetroCorp to the
seller in the Business Combination Transaction
determined as of the date the proposed Business
Combination first becomes publicly known.
(8) PROVISIONS RESPECTING ILLNESS AND DEATH . In the event Executive is unable
to perform his duties under this Agreement on a full-time basis by reason
of illness or other physical or mental disability, PetroCorp shall,
nevertheless continue to pay Executive his Annual Salary and Executive
shall nevertheless receive the additional benefits described in
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Paragraph 3 for a period of six (6) consecutive months. If, at or before
the end of such period, Executive does not return to work on a full-time
basis, PetroCorp may terminate this Agreement without further or additional
compensation being due the Executive from PetroCorp except Annual Salary ,
the additional benefits under Paragraph 3 accrued through the date of such
termination, and a proportionate part of the Annual Incentive Bonus. In the
event of the death of Executive during the Term of this Agreement,
PetroCorp shall pay pursuant to the direction of the Executive (and, in the
absence of such direction, to the estate of the Executive) Annual Salary
(but none of the additional benefits provided in Paragraph 3) for six
months following the date of the death.
(9) AGREEMENT NOT TO SOLICIT. Upon the termination of this Agreement, whether
for cause or upon the expiration of the Term, and for one year thereafter,
Executive shall not directly or indirectly (whether as an officer,
director, employee, partner, stockholder, creditor or agent, or
representative of other persons or entities) (i) contact or solicit
employees of PetroCorp or PetroCorp's affiliates to seek employment with
any person or entity except PetroCorp and its affiliates or (ii) without
the consent of PetroCorp acquire any interest in any oil and gas lease in
any quarter section of land (or in any quarter section of land contiguous
to any quarter section of such land) in which PetroCorp owned an oil and
gas lease as of the date of termination. Executive agrees that (i) any
remedy at law for any breach of the provisions of this Paragraph would be
inadequate, (ii) in the event of any breach of the provisions of this
Paragraph, this Agreement shall constitute incontrovertible evidence of
irreparable injury to PetroCorp, and (iii) PetroCorp shall be entitled to
both immediate and permanent injunctive relief without the necessity of
establishing posting any bond therefor. Executive shall maintain the
confidentiality of confidential information of PetroCorp and use it only
for the business purposes of PetroCorp.
(10) MISCELLANEOUS PROVISIONS. The following miscellaneous provisions shall
apply to this Agreement:
(a) All notices or advices required or permitted to be given by or
pursuant to this Agreement, shall be given in writing. All such
notices and advices
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shall be (i) delivered personally, (ii) delivered by facsimile or
delivered by U.S. Registered or Certified Mail, Return Receipt
Requested mail, or (iii) delivered for overnight delivery by a
nationally recognized overnight courier service. Such notices and
advices shall be deemed to have been given (i) the first business day
following the date of delivery if delivered personally or by
facsimile, (ii) on the third business day following the date of
mailing if mailed by U.S. Registered or Certified Mail, Return Receipt
Requested, or (iii) on the date of receipt if delivered for overnight
delivery by a nationally recognized overnight courier service. All
such notices and advices and all other communications related to this
Agreement shall be given as follows:
If to PetroCorp: PetroCorp Incorporated
Attention:Xxxxxx X. Xxxxxxx
00000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Telephone:(000) 000-0000
With a Copy to: Xxxxxxxx Xxxxxxx
Old City Hall
000 Xxxx Xxxxxx Xxxxxx
Xxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Executive: Xxxxxxx X. Xxxxxx
X.X. Xxx 00000
Xxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as the party may have furnished to the other
parties in accordance herewith, except that notice of change of
addresses shall be effective only upon receipt.
(b) This Agreement is made and executed in Tulsa, Oklahoma, and all
actions or proceedings with respect to, arising directly or indirectly
in connection with, out of, related to or from this Agreement, shall
be litigated in courts having situs in Tulsa County, Oklahoma.
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(c) This Agreement shall be subject to, and interpreted by and in
accordance with, the laws of the State of Oklahoma.
(d) This Agreement is the entire Agreement of the parties respecting the
subject matter hereof. There are no other agreements, representations
or warranties, whether oral or written, respecting the subject matter
hereof, except as stated in this Agreement.
(e) This Agreement, and all the provisions of this Agreement, shall be
deemed drafted by all of the parties hereto.
(f) This Agreement shall not be interpreted strictly for or against any
party, but solely in accordance with the fair meaning of the
provisions hereof to effectuate the purposes and interest of this
Agreement.
(g) Each party hereto has entered into this Agreement based solely upon
the agreements, representations and warranties expressly set forth
herein and upon his own knowledge and investigation. Neither party has
relied upon any representation or warranty of any other party hereto
except any such representations or warranties as are expressly set
forth herein.
(h) Each of the persons signing below on behalf of a party hereto
represents and warrants that he or she has full requisite power and
authority to execute and deliver this Agreement on behalf of the
parties for whom he or she is signing and to bind such party to the
terms and conditions of this Agreement.
(i) This Agreement may be executed in counterparts, each of which shall be
deemed an original. This Agreement shall become effective only when
all of the parties hereto shall have executed the original or
counterpart hereof. This Agreement may be executed and delivered by a
facsimile transmission of a counterpart signature page hereof.
(j) In any action brought by a party hereto to enforce the obligations of
any other party hereto, the prevailing party shall be entitled to
collect from the
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opposing party to such action such party's reasonable litigation costs
and attorneys fees and expenses (including court costs, reasonable
fees of accountants and experts, and other expenses incidental to the
litigation).
(k) This Agreement shall be binding upon and shall inure to the benefit of
the parties and their respective successors and assigns.
(l) This is not a third party beneficiary contract. No person or entity
other than a party signing this Agreement and those designated as a
third party beneficiary herein shall have any rights under this
Agreement.
(m) This Agreement may be amended or modified only in a writing which
specifically references this Agreement.
(n) A party to this Agreement may decide or fail to require full or timely
performance of any obligation arising under this Agreement. The
decision or failure of a party hereto to require full or timely
performance of any obligation arising under this Agreement (whether on
a single occasion or on multiple occasions) shall not be deemed a
waiver of any such obligation. No such decisions or failures shall
give rise to any claim of estoppel, laches, course of dealing,
amendment of this Agreement by course of dealing, or other defense of
any nature to any obligation arising hereunder.
(o) In the event any provision of this Agreement, or the application of
such provision to any person or set of circumstances, shall be
determined to be invalid, unlawful, or unenforceable to any extent for
any reason, the remainder of this Agreement, and the application of
such provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, or unenforceable,
shall not be affected and shall continue to be enforceable to the
fullest extent permitted by law.
(p) All sums required to paid in accordance with this Agreement which are
not timely paid shall bear interest at the rate of twelve (12) percent
per annum compounded annually.
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Dated and effective the date first set forth above.
PETROCORP INCORPORATED
By ________________________________________
Xxxxxx X. Xxxxxxx
_________________________________________
Xxxxxxx X. Xxxxxx
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EXHIBIT A
THREE EXAMPLES OF THE CALCULATION OF ANNUAL BONUS
AS DESCRIBED IN SECTION 6(d) THROUGH (g) NOT INCLUDING
THE DISCRETIONARY PORTION OF THE BONUS
* * *
Example 1: (A) YE to YE Reserves go from 12.4 MCFE per share to 12.8 MCFE per
share
(B) YE to YE EBITDA drops from $3.69 per share to $3.42 per share
(C) YE to YE per share stock price increased from $8.80 to $8.95 per
share
(A) = .25 (AS) (12.8
---- -1) = 0.008 (AS)
12.4
(B) = .25 (AS) (3.42
---- -1) = -0.018 (AS) - defaults to 0
3.69
(C) = .25 (AS) (8.95
---- -1) = 0.004 (AS)
8.80
Total Bonus Prior to Discretionary Portion = A + B + C = 0.012 (AS)
Example 2: (A) YE to YE Reserves go from 12.4 MCFE per share to 16 MCFE per
share
(B) YE to YE EBITDA go from $3.69 per share to $5.00 per share
(C) YE to YE per share stock price goes from $8.80 to $10.10 per
share
(A) = .25 (AS) (16.0
---- -1) = 0.073 (AS)
12.4
(B) = .25 (AS) (5.00
---- 1) = 0.089 (AS)
3.69
(C) = .25 (AS) (10.10
----- -1) = 0.037 (AS)
8.80
Total Bonus Prior to Discretionary Portion = A + B + C = 0.199 (AS)
Example 3: (A) YE to YE Reserves go from 12.4 MCFE per share to 17.6 MCFE
per share
(B) YE to YE EBITDA drops from $3.69 per share to $5.72 per share
(C) YE to YE Per share stock price increased from $8.80 to $16.00
per share
(A) = .25 (AS) (17.6
---- -1) = 0.105 (AS)
12.4
(B) = .25 (AS) (5.72
---- -1) = 0.137 (AS) - caps at 0.125 (AS)
3.69
(C) = .25 (AS) (16.00
----- -1) = 0.204 (AS) - caps at 0.125 (AS)
8.80
Total Bonus Prior to Discretionary Portion = A + B + C = 0.355 (AS)
YE = Year End as defined in the Employment Contract
AS = Annual Salary at the end of the year
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