Exhibit 10.10
EMPLOYMENT AGREEMENT
The parties to this Employment Agreement (this "Agreement") are LEGACY
RESERVES SERVICES, INC., a Texas corporation (the "Employer") and XXXXXX X.
XXXXXX (the "Employee"). The parties desire to provide for the employment of the
Employee as President and Chief Financial Officer of LEGACY RESERVES GP, LLC, a
Delaware limited liability company (the "Company") on the terms set forth herein
effective as of the date of completion of a private placement of equity
securities ("Units") of LEGACY RESERVES LP, a Delaware limited partnership
("Legacy"). Legacy is joining in this agreement for the limited purposes of
reflecting its agreement to the matters set forth herein as to it, but such
joinder is not intended to make Legacy the employer of the Employee for any
purpose. The date this Agreement becomes effective is herein referred to as the
"Effective Date".
1. POSITION AND DUTIES
1.1 Employment; Titles; Reporting. On the Effective Date, the Employer
agrees to employ the Employee and the Employee agrees to enter employment with
the Employer, upon the terms and subject to the conditions provided under this
Agreement. During the Employment Term (as defined in Section 2), the Employee
will serve as President and Chief Financial Officer of the Company. In such
capacity, the Employee will report to and otherwise will be subject to the
direction and control of the Board of Directors of the Company (including any
committee thereof, the "Board") and will have such duties, responsibilities and
authorities as may be assigned to him by the Board from time to time and
otherwise consistent with such position in a public company, comparable in size
to Legacy, which is engaged in natural gas and oil acquisition, development and
production (including, but not limited to, maintaining, to the extent
applicable, compliance with the Xxxxxxxx-Xxxxx Act of 2002 and related
regulations and all other federal, state and local laws and regulations, as well
as all regulations and rules of any exchange or electronic trading system on
which Legacy's securities may be traded).
1.2 Duties. During the Employment Term, the Employee will devote
substantially all of his full working time to the business and affairs of the
Employer, the Company and Legacy, will use his best efforts to promote the
Employer's, the Company's and Legacy's interests and will perform his duties and
responsibilities faithfully, diligently and to the best of his ability,
consistent with sound business practices. The Employee may be required by the
Board to provide services to, or otherwise serve as an officer or director of,
any direct or indirect subsidiary of the Employer, the Company or Legacy (the
Employer, the Company, Legacy and all such direct and indirect subsidiaries of
the Employer, the Company or Legacy being referred to herein as the "Related
Parties"), as applicable. The Employee will comply with the Employer's, the
Company's and Legacy's policies, codes and procedures, as they may be in effect
from time to time, applicable to executive officers of the Company and Legacy.
Nevertheless, the Employee may, with the prior approval of the Board in each
instance, engage in such other business and charitable activities that do not
violate Section 7, create a conflict of interest with the Employer, the Company
or Legacy or materially interfere with the performance of his obligations to the
Employer, the Company or Legacy under this Agreement. The activities in which
the Employee is engaged as of the Effective Date, all of which have been
approved by the Board, are listed on Exhibit A hereto.
1.3 Place of Employment. The Employee will perform his duties under this
Agreement at the Company's offices in Midland, Texas, with the likelihood of
substantial business travel.
2. TERM OF EMPLOYMENT. The term of the Employee's employment by the Employer
under this Agreement (the "Employment Term") will commence on the Effective Date
and will continue until employment is terminated by either party under Section
5. The date on which the Employee's employment ends is referred to in this
Agreement as the "Termination Date."
3. COMPENSATION.
3.1 Base Salary. During the Employment Term, the Employee will be entitled
to receive a base salary ("Base Salary") at an annual rate of not less than
$175,000 for services rendered to the Employer, any of its affiliates and any of
its or their direct or indirect subsidiaries, payable in accordance with the
Employer's regular payroll practices. The Employee's Base Salary will be
reviewed annually by the Board and may be adjusted upward in the Board's sole
discretion.
3.2 Annual Bonus Compensation. During the Employment Term, the Employee
will be entitled to receive incentive compensation in such amounts and at such
times as the Board may determine in its sole discretion to award to him under
any incentive compensation or other bonus plan or arrangement as may be
established by the Board from time to time (collectively, the "Employee Bonus
Plan"). Any additional incentive compensation payable under any Employee Bonus
Plan will be referred to in the aggregate in this Agreement as the Employee's
"Bonus."
3.3 Long-Term Incentive Compensation. Awards of Unit options, Unit grants,
restricted Units and/or other forms of equity-based compensation to the Employee
on or after the Effective Date may be made from time to time during the
Employment Term by the Board in its sole discretion, whose decision will be
based upon performance and award guidelines for executive officers of the
Company and Legacy established periodically by the Board in its sole discretion.
4. EXPENSES AND OTHER BENEFITS.
4.1 Reimbursement of Expenses. The Employee will be entitled to receive
prompt reimbursement for all reasonable expenses, including professional fees
and reasonable moving expenses, incurred by him during the Employment Term (in
accordance with the policies and practices presently followed by the Company or
as may be established by the Board from time to time for the Company's senior
executive officers) in performing services under this Agreement, provided that
the Employee properly accounts for such expenses in accordance with the
Company's and Legacy's policies as in effect from time to time.
4.2 Vacation. Employee will be entitled to paid vacation time each year
during the Employment Term that will accrue in accordance with the Company's
policies and procedures now in force or as such policies and procedures may be
modified with respect to all senior executive officers of the Company.
4.3 Other Employee Benefits. In addition to the foregoing, during the
Employment Term, the Employee will be entitled to participate in and to receive
benefits as a senior executive under all of the Company's and Legacy's employee
benefit plans, programs and arrangements available to senior executives, subject
to the eligibility criteria and other terms and conditions thereof, as such
plans, programs and arrangements may be duly amended, terminated, approved or
adopted by the Board from time to time.
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5. TERMINATION OF EMPLOYMENT.
5.1 Death. The Employee's employment under this Agreement will terminate
upon his death.
5.2 Termination by the Company.
(a) Terminable at Will. The Employer may terminate the Employee's
employment under this Agreement at any time with or without Cause (as
defined below).
(b) Definition of Cause. For purposes of this Agreement, the Employer
will have "Cause" to terminate the Employee's employment under this
Agreement by reason of any of the following: (i) the Employee's conviction
of, or plea of nolo contendere to, any felony or to any crime or offense
causing substantial harm to any of Legacy or its direct or indirect
subsidiaries (whether or not for personal gain) or involving acts of theft,
fraud, embezzlement, moral turpitude or similar conduct; (ii) the
Employee's repeated intoxication by alcohol or drugs during the performance
of his duties; (iii) malfeasance in the conduct of Employee's duties,
including, but not limited to, (A) willful and intentional misuse or
diversion of any of the Related Parties' funds, (B) embezzlement or (C)
fraudulent or willful and material misrepresentations or concealments on
any written reports submitted to any of the Related Parties; (iv) the
Employee's material failure to perform the duties of the Employee's
employment consistent with Employee's position, expressly including the
provisions of this Agreement, or material failure to follow or comply with
the reasonable and lawful written directives of the Board; (v) a material
breach of this Agreement; or (vi) a material breach by the Employee of
written policies of the Related Parties concerning employee discrimination
or harassment.
(c) Notice and Cure Opportunity in Certain Circumstances. The Employee
may be afforded a reasonable opportunity to cure any act or omission that
would otherwise constitute "Cause" hereunder according to the following
terms: The Board will cause the Employer to give the Employee written
notice stating with reasonable specificity the nature of the circumstances
determined by the Board in good faith to constitute "Cause." If, in the
good faith judgment of the Board, the alleged breach is reasonably
susceptible to cure, the Employee will have fifteen (15) days from his
receipt of such notice to effect the cure of such circumstances or such
breach to the good faith satisfaction of the Board. The Board will state
whether the Employee will have such an opportunity to cure in the initial
notice of "Cause" referred to above. If, in the good faith judgment of the
Board the alleged breach is not reasonably susceptible to cure, or such
circumstances or breach have not been satisfactorily cured within such
fifteen (15) day cure period, such breach will thereupon constitute "Cause"
hereunder.
5.3 Termination by the Employee.
(a) Terminable at Will. The Employee may terminate his employment
under this Agreement at any time with or without Good Reason (as defined
below).
(b) Notice and Cure Opportunity. If such termination is with Good
Reason, the Employee will give the Employer written notice, which will
identify with reasonable specificity the grounds for the Employee's
resignation and provide the Employer with fifteen (15) days from the day
such notice is given to cure the alleged grounds for resignation contained
in the notice. A termination will not be for Good Reason if such
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notice is given by the Employee to the Employer more than thirty (30) days
after the occurrence of the event that the Employee alleges is Good Reason
for his termination hereunder.
(c) Definition of Good Reason. For purposes of this Agreement, "Good
Reason" will mean any of the following to which the Employee has not
consented in writing: (a) a reduction in the Employee's Base Salary; (b) a
relocation of the Employee's primary place of employment to a location more
than 20 miles from Midland, Texas; or (c) any material reduction in the
Employee's title, authority or responsibilities as President and Chief
Financial Officer of the Company.
5.4 Notice of Termination. Any termination of the Employee's employment by
the Employer or by the Employee during the Employment Term (other than
termination pursuant to Section 5.1) will be communicated by written Notice of
Termination to the other party hereto in accordance with Section 8.7. For
purposes of this Agreement, a "Notice of Termination" means a written notice
that (a) indicates the specific termination provision in this Agreement relied
upon, (b) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated, and (c) if the Termination Date (as
defined herein) is other than the date of receipt of such notice, specifies the
Termination Date (which Termination Date will be not more than thirty (30) days
after the giving of such notice).
5.5 Disability. If the Employer determines in good faith that the
Disability (as defined herein) of the Employee has occurred during the
Employment Term, it may, without breaching this Agreement, give to the Employee
written notice in accordance with Section 5.4 of its intention to terminate the
Employee's employment. In such event, the Employee's employment with the
Employer will terminate effective on the fifteenth (15th) day after receipt of
such notice by the Employee (the "Disability Effective Date"), provided that,
within the fifteen (15) days after such receipt, the Employee will not have
returned to full-time performance of the Employee's duties. "Disability" means
the determination by a physician selected by the Employer that the Employee has
been unable to perform substantially the Employee's usual and customary duties
under this Agreement for a period of at least one hundred twenty (120)
consecutive days or a non-consecutive period of one hundred eighty (180) days
during any twelve-month period as a result of incapacity due to mental or
physical illness or disease. At any time and from time to time, upon reasonable
request therefor by the Employer, the Employee will submit to reasonable medical
examination for the purpose of determining the existence, nature and extent of
any such disability.
6. COMPENSATION OF THE EMPLOYEE UPON TERMINATION.
6.1 Death. If the Employee's employment under this Agreement is terminated
by reason of his death, the Employer will pay to the person or persons
designated by the Employee for that purpose in a notice filed with the Employer,
or, if no such person will have been so designated, to his estate, the amount of
(a) the Employee's accrued but unpaid Base Salary through the Termination Date
paid in a lump sum within thirty (30) days following the Termination Date, (b)
any accrued but unpaid Bonus, which Bonus will be payable at such time as the
bonuses of other executive officers of the Company are payable, (c) a pro rata
portion of any Bonus for the fiscal year in which the Termination Date occurs,
payable at such time as bonuses for the annual period are paid to other
executive officers of the Company, determined by multiplying the Employee's
target Bonus for such period by a fraction, the numerator of which is the number
of days from the first day of the fiscal year of the Company in which such
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termination occurs through and including the Termination Date and the
denominator of which is 365 ("Pro Rata Bonus"), and (d) any other amounts that
may be reimbursable by the Employer to the Employee as expressly provided under
this Agreement paid in a lump sum within thirty (30) days following the
Termination Date, and the Employer thereafter will have no further obligation to
the Employee under this Agreement, other than for payment of any amounts accrued
and vested under any employee benefit plans or programs of the Related Parties
and any payments or benefits required to be made or provided under applicable
law. Without limiting the generality of the foregoing, any rights the Employee's
beneficiary(ies) may have to the proceeds of any life insurance arrangement set
forth in Section 4.3 will be in lieu of any special entitlement to severance pay
or benefits upon the Employee's death.
6.2 Disability. In the event of the Employee's termination by reason of
Disability pursuant to Section 5.5, the Employee will continue to receive his
Base Salary and participate in applicable employee benefit plans or programs of
the Related Parties (on an equivalent basis to Section 6.4(a)(iv) below) through
the Termination Date, subject to offset dollar-for-dollar by the amount of any
disability income payments provided to the Employee under any disability policy
or program funded by any of the Related Parties, and will receive (a) the
Employee's accrued but unpaid Base Salary through the Termination Date paid in a
lump sum within thirty (30) days following the Termination Date, (b) any accrued
but unpaid Bonus, which Bonus will be payable at such time as the bonuses of
other executive officers of the Company are payable, (c) the Employee's Pro-Rata
Bonus, payable at such time as bonuses for the annual period are paid to other
executive officers of the Company, and (d) any other amounts that may be
reimbursable by the Employer to the Employee as expressly provided under this
Agreement paid in a lump sum within thirty (30) days following the Termination
Date, and the Employer thereafter will have no further obligation to the
Employee under this Agreement, other than for payment of any amounts accrued and
vested under any employee benefit plans or programs of the Related Parties and
any payments or benefits required to be made or provided under applicable law.
6.3 By the Company for Cause or the Employee Without Good Reason. If the
Employee's employment is terminated by the Company for Cause, or if the Employee
terminates his employment other than for Good Reason, the Employee will receive
(a) the Employee's accrued but unpaid Base Salary through the Termination Date
paid in a lump sum within thirty (30) days following the Termination Date, (b)
any accrued but unpaid Bonus, which Bonus will be payable at such time as the
bonuses of other executive officers of the Company are payable, and (c) any
other amounts that may be reimbursable by the Employer to the Employee as
expressly provided under this Agreement paid in a lump sum within thirty (30)
days following the Termination Date, and the Employer thereafter will have no
further obligation to the Employee under this Agreement, other than for payment
of any amounts accrued and vested under any employee benefit plans or programs
of the Related Parties and any payments or benefits required to be made or
provided under applicable law.
6.4 By the Employee for Good Reason or the Employer other than for Cause.
(a) Severance Benefits on Non-Change of Control Termination. Subject
to the provisions of Section 6.4(b) and Section 6.4(d), if prior to or more
than one (1) year after the occurrence of a Change of Control (as defined
below) the Employer terminates the Employee's employment without Cause, or
the Employee terminates his employment for Good Reason, then the Employee
will be entitled to the following benefits (the "Severance Benefits"):
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(i) an amount equal to (a) the Employee's accrued but unpaid Base
Salary through the Termination Date paid in a lump sum within thirty
(30) days following the Termination Date, (b) any accrued but unpaid
Bonus, which Bonus will be payable at such time as the bonuses of
other executive officers of the Company are payable, and (c) any other
amounts that may be reimbursable by the Employer to the Employee as
expressly provided under this Agreement paid in a lump sum within
thirty (30) days following the Termination Date;
(ii) twenty-four (24) monthly payments each in an amount equal to
one-twelfth (1/12) of the Employee's annual Base Salary at the highest
rate in effect at any time during the thirty-six (36)-month period
prior to the Termination Date plus the average annual Bonus of the two
(2) years preceding the Termination Date, commencing with the calendar
month immediately following the calendar month in which the
Termination Date occurs, it being agreed that for purposes hereof, the
Employee's Base Salary during the first twelve (12) months following
the Effective Date will be deemed to be $175,000;
(iii) a cash amount equal to the Employee's Pro-Rata Bonus for
the fiscal year in which the Termination Date occurs, payable at such
time as bonuses for the annual period are paid to other executive
officers of the Company; and
(iv) the Employer will pay the full cost of the Employee's COBRA
continuation coverage for such period, as such coverage is required to
be continued under applicable law; provided, however, that,
notwithstanding the foregoing, the benefits described in this Section
6.4(a)(iv) may be discontinued prior to the end of the period provided
in this subsection (iv) to the extent, but only to the extent, that
the Employee receives substantially similar benefits from a subsequent
employer ("COBRA Benefit").
(b) Change of Control Benefits. Subject to the provisions of Section
6.4(d), if within the one (1) year period following the occurrence of a
Change of Control, the Employer terminates the Employee's employment
without Cause, or the Employee terminates his employment for Good Reason,
then, in lieu of the Severance Benefits under Section 6.4(a), the Employee
will be entitled to benefits (the "Change of Control Benefits") identical
to those set forth in Section 6.4(a) except that the amount described in
clause (ii) will be equal to thirty-six (36) monthly payments and will be
paid in a lump sum within thirty (30) days following the Termination Date.
(c) Definition of Change of Control. For purposes of this Agreement, a
"Change of Control" will mean the first to occur of:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d) (3) or 14(d) (2) of the Securities
Exchange Act of 1934, as amended(the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 35% or more of either (A) the
then-outstanding equity interests of Legacy (the "Outstanding Legacy
Equity") or (B) the combined voting power of the then-outstanding
voting securities of Legacy entitled to vote generally in the election
of directors (the "Outstanding Legacy Voting Securities"); provided,
however, that, for purposes of this Section 6.4(c)(i), the following
acquisitions will not constitute a Change of
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Control: (A) any acquisition directly from Legacy, (B) any acquisition
by Legacy, (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Legacy or any affiliated
company, (D) any acquisition by any corporation or other entity
pursuant to a transaction that complies with Section 6.4(c)(iii)(A),
Section 6.4(c)(iii)(B) or Section 6.4(c)(iii)(C) or (E) any
acquisition of shares from Legacy arising out of or in connection with
an IPO or private placement of Legacy's securities;
(ii) Any time at which individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that
(A) any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by Legacy's Unitholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board will be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board, and (B) any individual becoming a
director subsequent to the date hereof whose election resulted from
Legacy's failure to file a registration statement within 240 days of
the Effective Date will be considered as though such individual were a
member of the Incumbent Board;
(iii) Consummation of a reorganization, merger, statutory share
exchange or consolidation or similar corporate transaction involving
Legacy or any of its subsidiaries, a sale or other disposition of all
or substantially all of the assets of Legacy, or the acquisition of
assets or equity interests of another entity by Legacy or any of its
subsidiaries (each, a "Business Combination"), in each case unless,
following such Business Combination, (A) all or substantially all of
the individuals and entities that were the beneficial owners of the
Outstanding Legacy Equity and the Outstanding Legacy Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of the then-outstanding equity
interests and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation or other
entity that, as a result of such transaction, owns Legacy or all or
substantially all of Legacy's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the
Outstanding Legacy Equity and the Outstanding Legacy Voting
Securities, as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of Legacy or such corporation or other
entity resulting from such Business Combination) beneficially owns,
directly or indirectly, 35% or more of, respectively, the
then-outstanding equity interests of the corporation or other entity
resulting from such Business Combination or the combined voting power
of the then-outstanding voting securities of such corporation or other
entity, except to the extent that such ownership existed prior to the
Business Combination, and (C) at least a majority of the members of
the board of directors of the corporation or equivalent body of any
other entity resulting from such Business Combination
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were members of the Incumbent Board at the time of the execution of
the initial agreement or of the action of the Board providing for such
Business Combination; or
(iv) Consummation of a complete liquidation or dissolution of
Legacy.
(d) Conditions to Receipt of Severance Benefits.
(i) Release. As a condition to receiving any Severance Benefits
or Change of Control Benefits to which the Employee may otherwise be
entitled under Section 6.4(a) or Section 6.4(b), the Employee will
execute a release (the "Release"), which will include an affirmation
of the restrictive covenants set forth in Section 7 and a
non-disparagement provision, in form and substance satisfactory to the
Employer, of any claims, whether arising under federal, state or local
statute, common law or otherwise, against the Employer and the Related
Parties which arise or may have arisen on or before the date of the
Release, other than any claims under this Agreement or any rights to
indemnification from the Employer and the Related Parties pursuant to
any provisions of the Related Parties' organizational documents or any
directors and officers liability insurance policies maintained by any
of the Related Parties. If the Employee fails or otherwise refuses to
execute a Release within a reasonable time after the Employer's
request to do so, and in all events prior to the date on which such
benefits are to be first paid to him, the Employee will not be
entitled to any Severance Benefits or Change of Control Benefits, as
the case may be, or any other benefits provided under this Agreement
and the Employer will have no further obligations with respect to the
provision of those benefits except as may be required by law.
(ii) Limitation on Benefits. If, following a termination of
employment that gives the Employee a right to the payment of Severance
Benefits under Section 6.4(a) or Section 6.4(b), the Employee violates
in any material respect any of the covenants in Section 7 or as
otherwise set forth in the Release, the Employee will have no further
right or claim to any payments or other benefits to which the Employee
may otherwise be entitled under Section 6.4(a) or Section 6.4(b) from
and after the date on which the Employee engages in such activities
and the Employer will have no further obligations with respect to such
payments or benefits, and the covenants in Section 7 will nevertheless
continue in full force and effect.
6.5 Severance Benefits Not Includable for Employee Benefits Purposes.
Except to the extent the terms of any applicable benefit plan, policy or program
provide otherwise, any benefit programs of any of the Related Parties that takes
into account the Employee's income will exclude any and all Severance Benefits
and Change of Control Benefits provided under this Agreement.
6.6 Exclusive Severance Benefits. The Severance Benefits payable under
Section 6.4(a) or the Change of Control Benefits payable under Section 6.4(b),
if they become applicable under the terms of this Agreement, will be in lieu of
any other severance or similar benefits that would otherwise be payable under
any other agreement, plan, program or policy of the Employer.
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6.7 Additional Payments by the Employer. Notwithstanding anything in this
Agreement to the contrary, in the event that any benefits payable or otherwise
provided under this Agreement would be
(a) subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), (such excise tax referred to
in this Agreement as the "Excise Tax"), then the Board may, in its sole
discretion, provide for the payment of, or otherwise reimburse the Employee
for, an amount up to such Excise Tax and any related taxes, fees or
penalties thereon as the Board may consider to be customary and appropriate
for a comparable public company; or
(b) deemed to constitute non-qualified deferred compensation subject
to Section 409A of the Code, the Employer will have the discretion to
adjust the terms of such payment or benefit as it deems necessary to comply
with the requirements of Section 409A to avoid the imposition of any excise
tax or other penalty with respect to such payment or benefit under Section
409A of the Code.
7. RESTRICTIVE COVENANTS.
7.1 Confidential Information. The Employee hereby acknowledges that in
connection with his employment by the Employer he has been provided and may in
the future be provided Confidential Information (as defined below) (including,
without limitation, procedures, memoranda, notes, records and customer and
supplier lists whether such information has been or is made, developed or
compiled by the Employee or otherwise has been or is made available to him)
regarding the business and operations of the Related Parties. The Employee
further acknowledges that such Confidential Information is unique, valuable,
considered trade secrets and deemed proprietary by the Related Parties. For
purposes of this Agreement, "Confidential Information" includes, without
limitation, any information heretofore or hereafter acquired, developed or used
by any of the Related Parties relating to Business Opportunities or Intellectual
Property or other geological, geophysical, economic, financial or management
aspects of the business, operations, properties or prospects of the Related
Parties, whether oral or in written form. The Employee agrees that all
Confidential Information is and will remain the property of one or more of the
Related Parties. The Employee further agrees, except for disclosures occurring
in the good faith performance of his duties for the Related Parties, during the
Employment Term and for a period of two (2) years after the Termination Date, to
hold in the strictest confidence all Confidential Information, and not to,
directly or indirectly, duplicate, sell, use, lease, commercialize, disclose or
otherwise divulge to any person or entity any portion of the Confidential
Information or use any Confidential Information for his own benefit or profit or
allow any person, entity or third party, other than the Related Parties and
authorized executives of the same, to use or otherwise gain access to any
Confidential Information. The Employee will have no obligation under this
Agreement with respect to any information that becomes generally available to
the public other than as a result of a disclosure by the Employee or his agent
or other representative or becomes available to the Employee on a
non-confidential basis from a source other than the Related Parties. Further,
the Employee will have no obligation under this Agreement to keep confidential
any of the Confidential Information to the extent that a disclosure of it is
required by law or is consented to by the Employer, the Company or Legacy;
provided, however, that if and when such a disclosure is required by law, the
Employee promptly will provide the Employer with notice of such requirement, so
that an appropriate protective order may be sought.
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7.2 Return of Property. Employee agrees to deliver promptly to the
Employer, upon termination of his employment hereunder, or at any other time
when the Employer so requests, all documents relating to the business of the
Related Parties, including without limitation: all geological and geophysical
reports and related data such as maps, charts, logs, seismographs, seismic
records and other reports and related data, calculations, summaries, memoranda
and opinions relating to the foregoing, production records, electric logs, core
data, pressure data, lease files, well files and records, land files, abstracts,
title opinions, title or curative matters, contract files, notes, records,
drawings, manuals, correspondence, financial and accounting information,
customer lists, statistical data and compilations, patents, copyrights,
trademarks, trade names, inventions, formulae, methods, processes, agreements,
contracts, manuals or any documents relating to the business of the Related
Parties and all copies thereof and therefrom; provided, however, that the
Employee will be permitted to retain copies of any documents or materials of a
personal nature or otherwise related to the Employee's rights under this
Agreement.
7.3 Non-Compete Obligations.
(a) Non-Compete Obligations During Employment Term. The Employee
agrees that during the Employment Term:
(i) the Employee will not, other than through the Related
Parties, unless approved in writing by a majority of the independent
members of the Board of Directors, engage or participate in any
manner, whether directly or indirectly through any family member or as
an employee, employer, consultant, agent, principal, partner, more
than one percent shareholder, officer, director, licensor, lender,
lessor or in any other individual or representative capacity, in any
business or activity which is engaged in leasing, acquiring,
exploring, producing, gathering or marketing hydrocarbons and related
products, unless set forth on the approved activities list on Exhibit
A; and
(ii) all investments made by the Employee (whether in his own
name or in the name of any family members or other nominees or made by
the Employee's controlled affiliates), which relate to the leasing,
acquisition, exploration, production, gathering or marketing of
hydrocarbons and related products will be made solely through the
Related Parties, unless approved in writing by a majority of the
independent members of the Board of Directors or unless such activity
is set forth on Exhibit A; and the Employee will not (directly or
indirectly through any family members or other persons), and will not
permit any of his controlled affiliates to: (A) invest or otherwise
participate alongside the Related parties in any Business
Opportunities, or (B) invest or otherwise participate in any business
or activity relating to a Business Opportunity, regardless of whether
any of the Related Parties ultimately participates in such business or
activity, in either case, except through the Related Parties, unless
approved in writing by a majority of the independent members of the
Board of Directors or unless such activity is set forth on Exhibit A.
(b) Non-Compete Obligations After Termination Date. The Employee
agrees that the Employee will not engage or participate in any manner,
whether directly or indirectly through any family member or other person or
as an employee, employer, consultant, agent principal, partner, more than
one percent shareholder, officer, director, licensor, lender, lessor or in
any other individual or representative capacity, unless
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approved in writing by a majority of the independent members of the Board
of Directors or unless such activity is set forth on Exhibit A:
(i) during the 90 day period following the Termination Date, in
any business or activity which is engaged in leasing, acquiring,
exploring, producing, gathering or marketing hydrocarbons and related
products within (A) any county or parish in which the Related Parties
own any oil and gas interests or conducts operations on the
Termination Date or in which the Related Parties have owned any oil
and gas interests or conducted operations at any time during the six
months immediately preceding the Termination Date or (B) any county or
parish adjacent to any county or parish described in clause (A); and
(ii) during the one (1) year period following the Termination
Date, in any business or activity which is a publicly traded oil and
gas income distribution company or partnership or a privately held
company or partnership that is contemplating an initial public
offering as an oil and gas income distribution company or partnership
that is in direct competition with the business of the Related Parties
in the leasing, acquiring, exploring, producing, gathering or
marketing of hydrocarbons and related products; provided that, this
subsection (ii) will not preclude the Employee from making investments
in securities of oil and gas companies which are registered on a
national stock exchange, if (A) the aggregate amount owned by the
Employee and all family members and affiliates does not exceed 5% of
such company's outstanding securities, and (B) the aggregate amount
invested in such investments by the Employee and all family members
and affiliates after the date hereof does not exceed $500,000.
(c) Not Applicable Following Change of Control Termination. The
Employee will not be subject to the covenants contained in this Section 7.3
and such covenants will not be enforceable against the Employee from and
after the date that the Employee's employment is terminated within one (1)
year after a Change of Control.
7.4 Non-Solicitation. During the Employment Term and for a period of
twenty-four (24) months after the Termination Date, the Employee will not,
whether for his own account or for the account of any other Person (other than
the Related Parties), intentionally solicit, endeavor to entice away from the
Related Parties, or otherwise interfere with the relationship of the Related
Parties with, (a) any person who is employed by the Related Parties (including
any independent sales representatives or organizations), or (b) any client or
customer of the Related Parties.
7.5 Assignment of Developments. The Employee assigns and agrees to assign
without further compensation to the Employer, and its successors, assigns or
designees, all of the Employee's right, title and interest in and to all
Business Opportunities and Intellectual Property (as those terms are defined
below), and further acknowledges and agrees that all Business Opportunities and
Intellectual Property constitute the exclusive property of the Employer.
For purposes of this Agreement, "Business Opportunities" means all business
ideas, prospects, proposals or other opportunities pertaining to the lease,
acquisition, exploration, production, gathering or marketing of hydrocarbons and
related products and the exploration potential of geographical areas on which
hydrocarbon exploration prospects are located, which are developed by the
Employee during the Employment Term, or originated by any third party
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and brought to the attention of the Employee during the Employment Term,
together with information relating thereto (including, without limitation,
geological and seismic data and interpretations thereof, whether in the form of
maps, charts, logs, seismographs, calculations, summaries, memoranda, opinions
or other written or charted means).
For purposes of this Agreement, "Intellectual Property" shall mean all
ideas, inventions, discoveries, processes, designs, methods, substances,
articles, computer programs and improvements (including, without limitation,
enhancements to, or further interpretation or processing of, information that
was in the possession of the Employee prior to the date of this Agreement),
whether or not patentable or copyrightable, which do not fall within the
definition of Business Opportunities, which the Employee discovers, conceives,
invents, creates or develops, alone or with others, during the Employment Term,
if such discovery, conception, invention, creation or development (A) occurs in
the course of the Employee's employment with the Employer, or (B) occurs with
the use of any of the time, materials or facilities of the Related Parties, or
(C) in the good faith judgment of the Board, relates or pertains in any material
way to the purposes, activities or affairs of the Related Parties.
7.6 Injunctive Relief. The Employee acknowledges that a breach of any of
the covenants contained in this Section 7 may result in material, irreparable
injury to the Employer for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that, in
the event of such a breach or threat of breach, the Employer will be entitled to
obtain a temporary restraining order and/or a preliminary or permanent
injunction restraining the Employee from engaging in activities prohibited by
this Section 7 or such other relief as may be required to specifically enforce
any of the covenants in this Section 7. To the extent that the Employer seeks a
temporary restraining order (but not a preliminary or permanent injunction), the
Employee agrees that a temporary restraining order may be obtained ex parte.
7.7 Adjustment of Covenants. The parties consider the covenants and
restrictions contained in this Section 7 to be reasonable. However, if and when
any such covenant or restriction is found to be void or unenforceable and would
have been valid had some part of it been deleted or had its scope of application
been modified, such covenant or restriction will be deemed to have been applied
with such modification as would be necessary and consistent with the intent of
the parties to have made it valid, enforceable and effective.
7.8 Forfeiture Provision.
(a) Detrimental Activities. If the Employee engages in any activity
that violates any covenant or restriction contained in this Section 7, in
addition to any other remedy the Employer may have at law or in equity, (i)
the Employee will be entitled to no further payments or benefits from the
Employer under this Agreement or otherwise, except for any payments or
benefits required to be made or provided under applicable law, (ii) all
unexercised Unit options, restricted Units and other forms of equity
compensation held by or credited to the Employee will terminate effective
as of the date on which the Employee engages in that activity, unless
terminated sooner by operation of another term or condition of this
Agreement or other applicable plans and agreements, and (iii) any exercise,
payment or delivery pursuant to any equity compensation award that occurred
within one year prior to the date on which the Employee engages in that
activity may be rescinded within one year after the first date that a
majority of the members of the Board first became aware that the Employee
engaged in that activity. In the event of any such rescission, the Employee
will pay to the
-12-
Employer the amount of any gain realized or payment received as a result of
the rescinded exercise, payment or delivery, in such manner and on such
terms and conditions as may be required.
(b) Right of Set-Off. The Employee consents to a deduction from any
amounts the Employer owes the Employee from time to time (including amounts
owed as wages or other compensation, fringe benefits, or vacation pay, as
well as any other amounts owed to the Employee by the Employer), to the
extent of the amounts the Employee owes the Employer under Section 7.8(a)
above. Whether or not the Employer elects to make any set-off in whole or
in part, if the Employer does not recover by means of set-off the full
amount the Employee owes, calculated as set forth above, the Employee
agrees to pay immediately the unpaid balance to the Employer. In the
discretion of the Board, reasonable interest may be assessed on the amounts
owed, calculated from the later of (i) the date the Employee engages in the
prohibited activity and (ii) the applicable date of exercise, payment or
delivery.
8. MISCELLANEOUS.
8.1 Assignment; Successors; Binding Agreement. This Agreement may not be
assigned by either party, whether by operation of law or otherwise, without the
prior written consent of the other party, except that any right, title or
interest of the Employer arising out of this Agreement may be assigned to any
corporation or entity controlling, controlled by, or under common control with
the Employer, or succeeding to the business and substantially all of the assets
of the Employer or any affiliates for which the Employee performs substantial
services. Subject to the foregoing, this Agreement will be binding upon and will
inure to the benefit of the parties and their respective heirs, legatees,
devisees, personal representatives, successors and assigns.
8.2 Modification and Waiver. Except as otherwise provided below, no
provision of this Agreement may be modified, waived, or discharged unless such
waiver, modification or discharge is duly approved by the Board and is agreed to
in writing by the Employee and such officer(s) as may be specifically authorized
by the Board to effect it. No waiver by any party of any breach by any other
party of, or of compliance with, any term or condition of this Agreement to be
performed by any other party, at any time, will constitute a waiver of similar
or dissimilar terms or conditions at that time or at any prior or subsequent
time.
8.3 Entire Agreement. This Agreement embodies the entire understanding of
the parties hereof, and, upon the Effective Date, will supersede all other oral
or written agreements or understandings between them regarding the subject
matter hereof. No agreement or representation, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement, has been made by
either party which is not set forth expressly in this Agreement.
8.4 Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by the laws of the State of Texas
other than the conflict of laws provision thereof.
8.5 Consent to Jurisdiction and Service of Process.
(a) Section 7 Disputes. In the event of any dispute, controversy or
claim between the Employer and the Employee arising out of or relating to
the interpretation, application or enforcement of the provisions of Section
7, the Employer and the
-13-
Employee agree and consent to the personal jurisdiction of the state and
local courts of Midland County, Texas and/or the United States District
Court for the Western District of Texas for resolution of the dispute,
controversy or claim, and that those courts, and only those courts, will
have jurisdiction to determine any dispute, controversy or claim related
to, arising under or in connection with Section 7 of this Agreement. The
Employer and the Employee also agree that those courts are convenient
forums for the parties to any such dispute, controversy or claim and for
any potential witnesses and that process issued out of any such court or in
accordance with the rules of practice of that court may be served by mail
or other forms of substituted service to the Employer at the address of its
principal executive offices and to the Employee at his last known address
as reflected in the Employer's records.
(b) Disputes Other Than Under Section 7. In the event of any dispute
relating to this Agreement, other than a dispute relating solely to Section
7, the parties will use their best efforts to settle the dispute, claim,
question, or disagreement. To this effect, they will consult and negotiate
with each other in good faith and, recognizing their mutual interests,
attempt to reach a just and equitable solution satisfactory to both
parties. If such a dispute cannot be settled through negotiation, the
parties agree first to try in good faith to settle the dispute by mediation
administered by the American Arbitration Association under its Commercial
Mediation Rules before resorting to arbitration, litigation, or some other
dispute resolution procedure. If the parties do not reach such solution
through negotiation or mediation within a period of sixty (60) days, then,
upon notice by either party to the other, all disputes, claims, questions,
or differences will be finally settled by arbitration administered by the
American Arbitration Association in accordance with the provisions of its
Commercial Arbitration Rules. The arbitrator will be selected by agreement
of the parties or, if they do not agree on an arbitrator within thirty (30)
days after either party has notified the other of his or its desire to have
the question settled by arbitration, then the arbitrator will be selected
pursuant to the procedures of the American Arbitration Association (the
"AAA") in Midland, Texas. The determination reached in such arbitration
will be final and binding on all parties. Enforcement of the determination
by such arbitrator may be sought in any court of competent jurisdiction.
Unless otherwise agreed by the parties, any such arbitration will take
place in Midland, Texas, and will be conducted in accordance with the
Commercial Arbitration Rules of the AAA.
8.6 Withholding of Taxes. The Employer will withhold from any amounts
payable under the Agreement all federal, state, local or other taxes legally
required to be withheld.
8.7 Notices. All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
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to the Employer, to:
Attn: Chairman of the Board
Legacy Reserves Services, Inc.
000 X. Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
to the Employee, to:
Xxxxxx X. Xxxxxx
0000 Xxxxxxxx Xxx
Xxxxxxx, XX 00000
Addresses may be changed by written notice sent to the other party at the last
recorded address of that party.
8.8 Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement will not affect the validity or enforceability of
any other provision of this Agreement, which will remain in full force and
effect.
8.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same instrument.
8.10 Headings. The headings used in this Agreement are for convenience
only, do not constitute a part of the Agreement, and will not be deemed to
limit, characterize, or affect in any way the provisions of the Agreement, and
all provisions of the Agreement will be construed as if no headings had been
used in the Agreement.
8.11 Construction. As used in this Agreement, unless the context otherwise
requires: (a) the terms defined herein will have the meanings set forth herein
for all purposes; (b) references to "Section" are to a section hereof; (c)
"include," "includes" and "including" are deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import; (d) "writing," "written" and comparable terms refer to printing,
typing, lithography and other means of reproducing words in a visible form; (e)
"hereof," "herein," "hereunder" and comparable terms refer to the entirety of
this Agreement and not to any particular section or other subdivision hereof or
attachment hereto; (f) references to any gender include references to all
genders; and (g) references to any agreement or other instrument or statute or
regulation are referred to as amended or supplemented from time to time (and, in
the case of a statute or regulation, to any successor provision).
8.12 Capacity; No Conflicts. The Employee represents and warrants to the
Employer that: (i) he has full power, authority and capacity to execute and
deliver this Agreement, and to perform his obligations hereunder, (ii) such
execution, delivery and performance will not (and with the giving of notice or
lapse of time, or both, would not) result in the breach of any agreement or
other obligation to which he is a party or is otherwise bound, and (iii) this
Agreement is his valid and binding obligation, enforceable in accordance with
its terms.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement effective
as of the Effective Date.
LEGACY RESERVES SERVICES, INC.
By: /s/ Xxxx X. Xxxxx
------------------------------------
Xxxx X. Xxxxx, Chief Executive
Officer
EMPLOYEE
/s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
FOR THE LIMITED PURPOSES SET FORTH HEREIN:
LEGACY RESERVES LP
By: LEGACY RESERVES GP, LLC
its general partner
By: /s/ Xxxx X. Xxxxx
------------------------------------
Xxxx X. Xxxxx, Chief Executive
Officer
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EXHIBIT A
APPROVED OUTSIDE ACTIVITIES AS OF EFFECTIVE DATE
President of PSI Management LLC as its sole member, which owns an undivided
1.0% working interest in 2500 gross acres in Midland County, TX operated by
Discovery Operating, Inc., of Midland, Texas with interests in four producing
xxxxx and two xxxxx in the process of being completed with a continuous drilling
program.
Mineral and overriding royalty interests in FGA Family Trust in the Permian
Basin and mid-continent owned by Xxxxxxx Xxxxxxx Xxxxxx (co-trustee of FGA),
wife of Xxxxxx X. Xxxxxx.
Investment in Quantum Energy Partners III, LP; and a 0.5% ownership
interest in Quantum Energy Management III, LP, its general partner. Both
investments are held by SHP Capital LP, whose partners are Xxxxxx X. Xxxxxx and
Xxxxxxx X. Xxxxxx, who also are the sole members of its general partner, SHP
Capital Management LLC.
