EXECUTIVE UNIT AGREEMENT
Exhibit 10.11
THIS
EXECUTIVE UNIT AGREEMENT (this “Agreement”) is made as of April 9, 2004, by and
among SPI PETROLEUM LLC, a Delaware limited liability company (the “Company”), Xxxxxxx X.
XxXxxxxx (“Executive”), NCA Energy, Inc., a Delaware corporation (“NCA”), RBCP
Energy Fund Investments, LP, a Delaware partnership (“RBC”), and Waud Capital Partners,
L.P., a Delaware limited partnership (“Waud”), and any other investment fund managed by
NCA, RBC or Waud that at any time acquires securities of the Company and executes a counterpart to
this Agreement or otherwise agrees to be bound by this Agreement. NCA, RBC and Waud are sometimes
individually referred to as an “Investor” and collectively as “Investors”.
The Company and Executive desire to enter into an agreement pursuant to which Executive will
purchase from the Company, and the Company will sell to Executive, 4,968.75 of the Company’s Common
Units (the “Common Units”). All Common Units acquired by Executive pursuant to this
Agreement or otherwise hereafter acquired are referred to herein as “Executive Securities.”
Certain definitions are set forth in Section 8 of this Agreement.
The execution and delivery of this Agreement by the Company and Executive is a condition to
the purchase of Senior Preferred Units by the Investors pursuant to an Investor Purchase Agreement
between the Company and the Investors of even date herewith.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
to this Agreement hereby agree as follows:
1. Purchase and Sale of Executive Securities.
(a) Upon execution of this Agreement, Executive will purchase, and the Company will sell to
Executive, 4,968.75 Common Units at a price of $0.01 per unit (which shall be deemed to be
“Carried Common Units”). The Company will deliver to Executive a unit ownership ledger
evidencing Executive’s ownership of such Carried Common Units, and Executive will deliver to the
Company a cashier’s or certified check or wire transfer of immediately available funds in the
aggregate amount of $49.69 as payment for the Carried Common Units.
(b) Within 30 days after the issuance of the Carried Common Units, Executive will make an
effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue
Code and the regulations promulgated thereunder in the form of Exhibit A attached hereto.
(c) Until the occurrence of a Qualified Change of Control, certificates (if any) evidencing
Executive Securities shall be held by the Company for the benefit of Executive and the other
holder(s) of Executive Securities. Upon the occurrence of a Qualified Change of Control, the
Company will return any such certificates for the Executive Securities to the record holders
thereof.
(d) In connection with the purchase and sale of the Executive Securities hereunder, Executive
represents and warrants to the Company that:
(i) The Executive Securities to be acquired by Executive pursuant to this Agreement
will be acquired for Executive’s own account and not with a view to, or intention of,
distribution thereof in violation of the Securities Act, or any applicable state securities
laws, and the Executive Securities will not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
(ii) Executive is an executive officer of the Company or one or more of its
Subsidiaries, is sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Executive Securities.
(iii) Executive is able to bear the economic risk of his investment in the Executive
Securities for an indefinite period of time because the Executive Securities have not been
registered under the Securities Act and, therefore, cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and receive answers concerning
the terms and conditions of the offering of Executive Securities and has had full access to
such other information concerning the Company as he has requested.
(v) This Agreement constitutes the legal, valid and binding obligation of Executive,
enforceable in accordance with its terms, and the execution, delivery and performance of
this Agreement by Executive does not and will not conflict with, violate or cause a breach
of any agreement, contract or instrument to which Executive is a party or any judgment,
order or decree to which Executive is subject.
(vi) Executive has not and will not take any action that will conflict with, violate or
cause a breach of any noncompete, nonsolicitation or confidentiality agreement to which
Executive is a party or by which Executive is bound.
(vii) Executive is a resident of the State of Oklahoma.
(e) As an inducement to the Company to issue the Executive Securities to Executive, and as a
condition thereto, Executive acknowledges and agrees that neither the issuance of the Executive
Securities to Executive nor any provision contained herein shall entitle Executive to remain in the
employment of the Company or any of its Subsidiaries or affect the right of the Company or any of
its Subsidiaries to terminate Executive’s employment at any time for any reason.
(f) Concurrently with the execution of this Agreement, Executive shall execute in blank ten
security transfer powers in the form of Exhibit B attached hereto (the
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“Security Powers”) with respect to the Executive Securities and shall deliver such
Security Powers to the Company. The Security Powers shall authorize the Company to assign,
transfer and deliver the Executive Securities to the appropriate acquiror thereof pursuant to
Section 3 below or Section 9.5 of the LLC Agreement and under no other
circumstances.
2. Vesting of Common Units.
(a) The Carried Common Units shall include a time-vesting component and performance-vesting
component, and shall be subject to vesting in the manner specified in this Section 2.
(b) Time-Vesting Carried Common Units.
(i) 1,987.5 Carried Common Units (the “Time-Vesting Carried Common Units”) will
vest annually over a five-year period, provided that the Executive is employed by the
Company or one or more of its Subsidiaries as of each successive anniversary of the date
hereof. Such Time-Vesting Carried Common Units shall vest as follows:
| Aggregate Time-Vesting | ||||
| Anniversary of the date hereof | Carried Common Units vested as of such date | |||
1st Anniversary |
15.0 | % | ||
2nd Anniversary |
30.0 | % | ||
3rd Anniversary |
45.0 | % | ||
4th Anniversary |
72.5 | % | ||
5th Anniversary |
100.0 | % | ||
(ii) Immediately prior to the occurrence of a Qualified Change of Control, all
shares of Time-Vesting Carried Common Units which have not yet become vested shall become
vested at the time of such event if the Executive (at the acquiror’s request) agrees to
continue to provide services to the Company and its Subsidiaries (or their respective
successors) for a period of one year following such Qualified Change of Control
(provided that the compensation and benefits package and other terms offered
to Executive, taken as a whole, are at least as favorable as the compensation and benefits
package, taken as a whole, of Executive immediately prior to such Qualified Change of
Control).
(c) Performance Vesting.
(i) Up to 2,981.25 Carried Common Units (the “Performance-Vesting Carried Common
Units”) will vest upon the achievement of the Investor IRR hurdles set forth below upon
the occurrence of a Qualified Change of Control; provided that the
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Executive (at the acquiror’s request) agrees to continue to provide services to the
Company or its Subsidiaries (and their respective successors) for one year following such
Qualified Change of Control (so long as the compensation and benefits package and other
terms offered to Executive, taken as a whole, are at least as favorable as the compensation
and benefits package, taken as a whole, of Executive immediately prior to such Qualified
Change of Control).
| Investor | Percentage of Performance-Vesting | |||
| IRR | Carried Common Units Vested | |||
25% |
33.33 | % | ||
30% |
66.67 | % | ||
35% |
100.00 | % | ||
(d) Carried Common Units that have become vested are referred to herein as “Vested
Units.” All Carried Common Units that have not vested are referred to herein as “Unvested
Units.”
3. Repurchase Option.
(a) In the event Executive ceases to be employed by the Company or any of its Subsidiaries for
any reason (the “Separation”), the Executive Securities (whether held by Executive or one
or more of Executive’s Permitted Transferees, other than the Company and the Investors) will be
subject to repurchase, in each case by the Company and the Investors pursuant to the terms and
conditions set forth in this Section 3 (the “Repurchase Option”).
(i) In the event that Executive’s employment is terminated with Cause or Executive
resigns without Good Reason prior to the fifth anniversary of the date hereof, the Unvested
Units will be forfeited, and the Vested Units (whether held by Executive or one or more of
Executive’s Permitted Transferees, other than the Company and the Investors) will be subject
to repurchase at the lower of Original Cost and Fair Market Value thereof.
(ii) In event that Executive’s employment is terminated without Cause, Executive
resigns with Good Reason or Executive resigns without Good Reason after the fifth
anniversary of the date hereof, the Vested Units (whether held by Executive or one or more
of Executive’s Permitted Transferees, other than the Company and the Investors) will be
subject to repurchase at the Fair Market Value thereof, and the Unvested Units will be
forfeited. Notwithstanding the foregoing, in the event that Executive’s employment with the
Company and its Subsidiaries terminates pursuant to this paragraph 3(a)(ii) after the second
anniversary of the date hereof, a number of Performance-Vesting Carried Common Units equal
to (x) 2,981.25 multiplied by (y) the product of (1) .10 and (2) the number
of complete years elapsed since the date hereof shall not be subject to
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repurchase pursuant
to this paragraph 3(a)(ii) (the “Retained Performance-Vesting
Carried Common Units”). The Retained Performance-Vesting Carried Common Units
shall continue to be subject to the performance-vesting criteria specified in paragraph
2(c), but will be forfeited if a Qualified Change of Control is not consummated within six
months from the date of Executive’s termination.
(iii) In the event of a termination as a result of Executive’s death, Disability or
retirement, the Vested Units will be subject to repurchase at the Fair Market Value thereof,
and the Unvested Units will be forfeited. As used in this clause (iii), the term
“retirement” means retirement as of or following the federal age for retirement.
(b) In connection with the exercise of the Repurchase Option, the Company (with Board
approval) may elect to purchase all or any portion of the Executive Securities subject to
repurchase hereunder by delivering written notice of its election to Executive within one (1) year
days after Executive’s Separation (the “Repurchase Notice”). The Repurchase Notice will
set forth the number of Executive Securities to be acquired from each holder, the aggregate
consideration to be paid for such units and the time and place for the closing of the transaction.
(c) If for any reason the Company does not elect to purchase all of the Executive Securities
pursuant to the Repurchase Option, the Investors shall be entitled to exercise the Repurchase
Option for all (but not less than all) of the Executive Securities the Company has not elected to
purchase (the “Available Securities”). As soon as practicable after the Company has
determined that there will be Available Securities, the Company shall give written notice (the
“Option Notice”) to the Investors setting forth the number of Available Securities and the
purchase price for the Available Securities. The Investors may elect to purchase all (but not less
than all) of the Available Securities by giving written notice to the Company within 30 days after
the Option Notice has been given by the Company. If the Investors elect to purchase an aggregate
number greater than the number of Available Securities, the Available Securities shall be allocated
among the Investors based upon the number of Senior Preferred Units then owned by each Investor.
As soon as practicable, and in any event within ten days, after the expiration of the 30-day period
set forth above, the Company shall notify each holder of Executive Securities as to the number of
units being purchased from such holder by the Investors (the “Supplemental Repurchase
Notice”). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s)
of Executive Securities, the Company shall also deliver written notice to each Investor setting
forth the number of units such Investor is entitled to purchase, the aggregate purchase price and
the time and place of the closing of the transaction. The number of Executive Securities to be
repurchased hereunder shall be allocated among the Company and the Investors pro rata according to
the number of Executive Securities to be purchased by each of them. In no event shall the Company
and the Investors collectively elect to purchase less than 100% of the Executive Securities then
subject to repurchase hereunder.
(d) The closing of the purchase of the Executive Securities pursuant to the Repurchase Option
shall take place on the date designated by the Company in the Repurchase
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Notice or Supplemental
Repurchase Notice (subject to the final determination of Fair Market
Value hereunder), which date shall not be more than 30 days after the final determination of
the Fair Market Value of such Executive Securities, nor less than five days after the delivery of
the Repurchase Notice or Supplemental Repurchase Notice.
(e) The Company will pay for the Executive Securities to be purchased by it pursuant to the
Repurchase Option by first offsetting amounts outstanding under any bona fide debts owed by
Executive to the Company and will pay the remainder of the purchase price by, at its option, (A) a
check or wire transfer of funds, (B) a subordinated note or notes payable in up to three annual
installments beginning on the first anniversary of the closing of such purchase and bearing
interest (payable quarterly) at a rate per annum equal to the prime rate as published in The
Wall Street Journal from time to time or (C) any combination of (A) and (B) as the Board may
elect in its discretion. Each Investor will pay for the Executive Securities purchased by it by a
check or wire transfer of funds. The Company and the Investors will be entitled to receive
customary representations and warranties from the sellers regarding such sale and to require that
all sellers’ signatures be guaranteed.
(f) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of
Executive Securities by the Company pursuant to the Repurchase Option shall be subject to
applicable restrictions contained in the Delaware Limited Liability Company Act, the Delaware
General Corporation Law or such other governing law, and applicable restrictions in the Company’s
and its Subsidiaries’ debt and equity financing agreements. If any such restrictions prohibit (i)
the repurchase of Executive Securities hereunder which the Company is otherwise entitled or
required to make or (ii) dividends or other transfers of funds from one or more Subsidiaries to the
Company to enable such repurchases, then the Company may make such repurchases as soon as it is
permitted to make repurchases or receive funds from Subsidiaries under such restrictions.
(g) The provisions of this Section 3 shall terminate upon the earlier to occur of the
consummation of (i) a Qualified Public Offering, and (ii) a Qualified Change of Control.
4. Restrictions on Transfer of Executive Securities.
(a) Transfer of Executive Securities. The holders of Executive Securities shall not
Transfer any interest in any Executive Securities, except pursuant to (i) the provisions of
Section 3 hereof, (ii) the provisions of Articles 9 and 10 of the LLC
Agreement, or (iii) the provisions of Section 4(b) below.
(b) Certain Permitted Transfers. The restrictions in this Section 4 will not
apply with respect to any Transfer of Executive Securities made pursuant to applicable laws of
descent and distribution or to such Person’s legal guardian in the case of any mental incapacity or
among such Person’s Family Group; provided that the restrictions contained in this
Section 4 will continue to be applicable to the Executive Securities after any Transfer of
the type referred to above and the transferees of such Executive Securities must agree in writing
to be bound by the provisions of this Agreement. Any transferee of Executive Securities pursuant
to a Transfer in
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accordance with the provisions of this Section 4(b) is herein referred to
as a “Permitted
Transferee.” Upon the Transfer of Executive Securities pursuant to this Section
4(b), the transferring holder of Executive Securities will deliver a written notice (a
“Transfer Notice”) to the Company. The Transfer Notice will disclose in reasonable detail
the identity of the Permitted Transferee(s).
5. Additional Restrictions on Transfer of Executive Securities.
(a) Legend. The certificates representing the Executive Securities will bear a legend
in substantially the following form:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF APRIL
___, 2004, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
AGREEMENTS SET FORTH IN AN EXECUTIVE UNIT AGREEMENT BETWEEN THE COMPANY AND AN
EXECUTIVE OF THE COMPANY DATED AS OF APRIL ___, 2004. A COPY OF SUCH AGREEMENT MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY’S PRINCIPAL PLACE OF BUSINESS
WITHOUT CHARGE.”
(b) Opinion of Counsel. No holder of Executive Securities may Transfer any Executive
Securities (except pursuant to an effective registration statement under the Securities Act)
without first delivering to the Company a written notice describing in reasonable detail the
proposed Transfer, together with an opinion of counsel (reasonably acceptable in form and substance
to the Company) that neither registration nor qualification under the Securities Act and applicable
state securities laws is required in connection with such transfer. In addition, if the holder of
the Executive Securities delivers to the Company an opinion of counsel that no subsequent Transfer
of such Executive Securities shall require registration under the Securities Act, the Company shall
promptly upon such contemplated Transfer deliver new certificates for such Executive Securities
that do not bear the Securities Act portion of the legend set forth in Section 5(a). If
the Company is not required to deliver new certificates for such Executive Securities not bearing
such legend, the holder thereof shall not Transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the conditions contained in this
Section 5.
6. Confidential Information.
(a) Obligation to Maintain Confidentiality. Executive acknowledges that the
information, observations and data obtained by him during his employment with the Company and its
Subsidiaries (the “Employment Period”) concerning the business and affairs of the
Company
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and its Subsidiaries and Affiliates are the property of the Company, its Subsidiaries
and Affiliates, including information concerning acquisition opportunities in or reasonably related
to the Company’s and its Subsidiaries’ business or industry of which Executive becomes aware during
the Employment Period. Therefore, Executive agrees that he will not disclose to any unauthorized
Person or use for his own account any of such information, observations or data without the Board’s
written consent, unless and to the extent that the aforementioned matters, (i) become generally
known to and available for use by the public other than as a result of Executive’s acts or
omissions to act, (ii) was known to Executive prior to Executive’s employment with the Company or
any of its Subsidiaries and Affiliates, or (iii) is required to be disclosed pursuant to any
applicable law or court order. Executive agrees to deliver to the Company at a Separation, or at
any other time the Company may request in writing, all memoranda, notes, plans, records, reports
and other documents (and copies thereof) relating to the business of the Company, its Subsidiaries
and Affiliates (including, without limitation, all acquisition prospects, lists and contact
information) which he may then possess or have under his control.
(b) Ownership of Property. Executive acknowledges that all inventions, innovations,
improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, and
all similar or related information (whether or not patentable) that relate to the Company’s, its
Subsidiaries’ or Affiliates’ actual or anticipated business, research and development, or existing
or future products or services and that are conceived, developed, contributed to, made, or reduced
to practice by Executive (either solely or jointly with others) during the Employment Period
(including any of the foregoing that constitutes any proprietary information or records) (“Work
Product”) belong to the Company, its Subsidiaries or Affiliates and Executive hereby assigns,
and agrees to assign, all of the above Work Product to the Company, its Subsidiaries or Affiliates.
Any copyrightable work prepared in whole or in part by Executive in the course of his work for any
of the foregoing entities shall be deemed a “work made for hire” under the copyright laws, and the
Company or such Subsidiary or Affiliate shall own all rights therein. To the extent that any such
copyrightable work is not a “work made for hire,” Executive hereby assigns and agrees to assign to
the Company or such Subsidiary or Affiliate all right, title, and interest, including without
limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such
Work Product and copyrightable work to the Board and perform all actions reasonably requested by
the Board (whether during or after the Employment Period) to establish and confirm the Company’s or
such Subsidiary’s or Affiliate’s ownership (including, without limitation, assignments, consents,
powers of attorney, and other instruments).
(c) Third Party Information. Executive understands that the Company, its Subsidiaries
and Affiliates will receive from third parties confidential or proprietary information (“Third
Party Information”) subject to a duty on the Company’s, its Subsidiaries’ and Affiliates’ part
to maintain the confidentiality of such information and to use it only for certain limited
purposes. During the period Executive is employed by the Company or its Subsidiaries and
thereafter, and without in any way limiting the provisions of Section 6(a) above, Executive
will
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hold Third Party Information in the strictest confidence and will not disclose to anyone
(other
than personnel of the Company, its Subsidiaries and Affiliates who need to know such
information in connection with their work for the Company, its Subsidiaries and Affiliates) or use,
except in connection with his work for the Company, its Subsidiaries and Affiliates, Third Party
Information unless expressly authorized by a member of the Board in writing.
(d) Use of Information of Prior Employers. During the Employment Period, Executive
will not improperly use or disclose any confidential information or trade secrets, if any, of any
former employers or any other Person to whom Executive has an obligation of confidentiality, and
will not bring onto the premises of the Company, its Subsidiaries or Affiliates any unpublished
documents or any property belonging to any former employer or any other Person to whom Executive
has an obligation of confidentiality unless consented to in writing by the former employer or
Person. Executive will use in the performance of his duties only information which is (i)
generally known and used by persons with training and experience comparable to Executive’s and
which is (x) common knowledge in the industry or (y) is otherwise legally in the public domain,
(ii) is otherwise provided or developed by the Company, its Subsidiaries or Affiliates or (iii) in
the case of materials, property or information belonging to any former employer or other Person to
whom Executive has an obligation of confidentiality, approved for such use in writing by such
former employer or Person.
7. Noncompetition and Nonsolicitation. Executive acknowledges that in the course of
his employment with the Company and/or its Subsidiaries he has and will become familiar with the
Company’s and its Subsidiaries’ trade secrets and with other confidential information concerning
the Company and such Subsidiaries and that his services will be of special, unique and
extraordinary value to the Company and its Subsidiaries. Therefore, Executive agrees that:
(a) Noncompetition. During the Employment Period and for a period of one year
thereafter (the “Noncompete Period”), Executive shall not, anywhere in the United States or
in any geographical area in which the Company or its Subsidiaries engage or plan to engage in
business, directly or indirectly through any other Person, own, manage, control, participate in,
consult with, render services for, or in any manner engage in any business competing for the same
business with the businesses of the Company or its Subsidiaries. Nothing herein shall prohibit
Executive from being a passive owner of not more than 2% of the outstanding stock of any class of a
corporation that is publicly traded, so long as Executive has no active participation in the
business of such corporation.
(b) Nonsolicitation. During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee of the Company or
its Subsidiaries to leave the employ of the Company or such Subsidiary, or in any way interfere
with the relationship between the Company and any of its Subsidiaries and any employee thereof,
(ii) hire any person who was an employee of the Company or any of its Subsidiaries within two years
after such person ceased to be an employee of the Company or any of its Subsidiaries, (iii) induce
or attempt to induce any customer, supplier, licensee or other business relation of the Company or
any of its Subsidiaries to cease doing business with the
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Company or any such Subsidiary or in any
way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company and any Subsidiary or (iv)
directly or indirectly acquire or attempt to acquire an interest in any business competing with the
business of the Company or any of its Subsidiaries and with which the Company and any of its
Subsidiaries has entertained discussions or has requested and received information relating to the
acquisition of such business by the Company or any of its Subsidiaries in the two-year period
immediately preceding a Separation.
(c) Enforcement. If, at the time of enforcement of Section 6 or this
Section 7, a court holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum duration, scope or
geographical area reasonable under such circumstances shall be substituted for the stated period,
scope or area and that the court shall be allowed to revise the restrictions contained herein to
cover the maximum duration, scope and area permitted by law. Because Executive’s services are
unique and because Executive has access to confidential information, the parties hereto agree that
money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the
event a breach or threatened breach of this Agreement, the Company, its Subsidiaries or their
successors or assigns may, in addition to other rights and remedies existing in their favor, apply
to any court of competent jurisdiction for specific performance and/or injunctive or other relief
in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or
other security).
(d) Additional Acknowledgments. Executive acknowledges that the provisions of this
Section 7 are in consideration of the issuance of the Executive Securities by the Company
and additional good and valuable consideration as set forth in this Agreement. In addition,
Executive agrees and acknowledges that the restrictions contained in Section 6 and this
Section 7 do not preclude Executive from earning a livelihood, nor do they unreasonably
impose limitations on Executive’s ability to earn a living. In addition, Executive acknowledges
(i) that the business of the Company and its Subsidiaries will be conducted throughout the United
States, (ii) notwithstanding the state of incorporation or principal office of the Company or any
of its Subsidiaries, or any of their respective executives or employees (including the Executive),
it is expected that the Company and its Subsidiaries will have business activities and have
valuable business relationships within its industry throughout the United States, and (iii) as part
of his responsibilities, Executive will be traveling around the world in furtherance of the
Company’s and its Subsidiaries’ business and its relationships. Executive agrees and acknowledges
that the potential harm to the Company and its Subsidiaries of the non-enforcement of Section
6 and this Section 7 outweighs any potential harm to Executive of its enforcement by
injunction or otherwise. Executive acknowledges that he has carefully read this Agreement and has
given careful consideration to the restraints imposed upon Executive by this Agreement, and is in
full accord as to their necessity for the reasonable and proper protection of confidential and
proprietary information of the Company and its Subsidiaries now existing or to be developed in the
future. Executive expressly acknowledges and agrees that each and every restraint imposed by this
Agreement is reasonable with respect to subject matter, time period and geographical area.
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8. Definitions.
“Affiliate” means, (i) with respect to any Person, any Person that controls, is
controlled by or is under common control with such Person or an Affiliate of such Person, and (ii)
with respect to any Investor, any general or limited partner of such Investor, any employee or
owner of any such partner, or any other Person controlling, controlled by or under common control
with such Investor.
“Board” means the board of managers of the Company.
“Cause” shall mean (i) the commission by Executive of a felony, of theft, fraud or
embezzlement or of any other intentional act or omission involving dishonesty or disloyalty with
respect to the Company, its Subsidiaries or any of their respective customers or suppliers; (ii)
the inability to perform material duties and responsibilities as result of any addiction to alcohol
or drugs, other than drugs legally prescribed and administered by a duly licensed physician or the
reporting to work under the influence of alcohol or illegal drugs, (iii) the willful, substantial
and repeated failure to follow lawful written instructions of the Board or the Chief Executive
Officer, (iv) willful misconduct with respect to the Company or any of its Subsidiaries or (v)
breach of any confidentiality agreements which xxxxx the Company or material breach of this
Agreement.
“Disability” means Executive’s inability to perform the essential duties,
responsibilities and functions of his position with the Company and its Subsidiaries as a result of
any disability or incapacity for a period of 6 consecutive months, as determined by a physician
selected in good faith by the Board.
“Executive Securities” will continue to be Executive Securities in the hands of any
holder other than Executive (except for the Company and the Investors and except for transferees in
a Public Sale), and except as otherwise provided herein, each such other holder of Executive
Securities will succeed to all rights and obligations attributable to Executive as a holder of
Executive Securities hereunder. Executive Securities will also include equity of the Company (or a
corporate successor to the Company) issued with respect to Executive Securities (i) by way of a
unit split, unit dividend, conversion, or other recapitalization or (ii) by way of reorganization
or recapitalization of the Company in connection with the incorporation of a corporate successor
prior to a Public Offering. Notwithstanding the foregoing, all unvested Units shall remain
unvested Units after any Transfer thereof.
“Fair Market Value” of each unit or share of capital stock or other type of security
means the average of the closing prices of the sales of any such security on all securities
exchanges on which such security may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so listed, the average of
the representative bid and asked prices quoted in the Nasdaq Stock Market as of 4:00 P.M., New York
time, or, if on any day such security is not quoted in the Nasdaq Stock Market, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported
by the National Quotation Bureau Incorporated, or any similar successor
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organization, in each such case averaged over a period of 21 days consisting of the day as of
which the Fair Market Value is being determined and the 20 consecutive business days prior to such
day. With respect to any unit or other share of capital stock or other type of security which is
not, as of the date of determination, listed on any securities exchange or quoted in the Nasdaq
Stock Market or the over-the-counter market, the Fair Market Value thereof shall be the fair value
of such unit or share or other type of security, as the case may be, determined in good faith by
the Board, without regard for any minority discount or lack of marketability discount. Executive
may hire an independent outside appraiser (at Executive’s expense) to determine the Fair Market
Value of Executive Securities at any time such determination has been made in good faith by the
Board hereunder. If the determination by Executive’s appraiser is less than 110% of the Board’s
determination, the Board’s determination of Fair Market Value shall be determinative. If the
determination by Executive’s appraiser is greater than 110% of the Board’s determination, the
Company shall promptly, but in any event within 5 business days after the determination made by
Executive’s appraiser, as the case may be, identify an independent outside appraiser. The
Company’s appraiser and the Executive’s appraiser shall select a third independent outside
appraiser to make the final determination of Fair Market Value, and the expense of such third party
appraiser shall be shared equally by the Company and Executive.
“Family Group” means a Person’s spouse and descendants (whether natural or adopted),
and any trust, family limited partnership, limited liability company or other entity wholly owned,
directly or indirectly, by such Person or such Person’s spouse and/or descendants that is and
remains solely for the benefit of such Person and/or such Person’s spouse and/or descendants and
any retirement plan for such Person.
“Good Reason” means (i) a reduction of Executive’s duties and responsibilities with
the Company and its Subsidiaries such that after such reduction, Executive’s duties and
responsibilities with the Company and its Subsidiaries are inconsistent with a management position,
or (ii) any material failure by the Company to comply with the provisions of this Agreement.
“Investor IRR” means the interest rate compounded annually which, when used as the
discount rate to calculate the net present value as of the date on which the holder of Investor
Senior Preferred Units made a capital contribution with respect to such Units of the aggregate
Inflows and Outflows, causes such net present value to equal zero. For purposes of the foregoing
net present value calculation, (A) distributions shall be positive numbers, (B) capital
contributions shall be negative numbers, (C) the distributions and capital contributions shall be
deemed to have been received or made on the first day of the month nearest the actual date of such
receipt or payment, and (D) tax distributions shall not be taken into account. “Inflows” means
the sum of all cash payments received by the holders of Senior Preferred Units in respect of units
purchased by the Investors in exchange for their $50 million commitment except as provided in (D)
above. “Outflows” means the sum of all cash contributions up to $50 million made by the Investors
to and in the Company to acquire Senior Preferred Units or make capital contributions with respect
to such Senior Preferred Units.
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“LLC Agreement” means the Limited Liability Company Agreement of the Company, as
amended from time to time pursuant to its terms.
“Original Cost” means, with respect to each Common Unit purchased hereunder, $0.01 (as
proportionately adjusted for all subsequent unit splits, unit dividends and other
recapitalizations).
“Person” means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization, investment fund, any other business entity and a governmental entity or any
department, agency or political subdivision thereof.
“Public Offering” means the sale in an underwritten public offering registered under
the Securities Act of equity securities of the Company or a corporate successor to the Company.
“Public Sale” means (i) any sale pursuant to a registered public offering under the
Securities Act or (ii) any sale to the public pursuant to Rule 144 promulgated under the Securities
Act effected through a broker, dealer or market maker (other than pursuant to Rule 144(k) prior to
a Public Offering).
“Qualified Change of Control” means a transaction (or series of related transactions),
the consummation of which results in the acquisition by an independent third party or independent
third parties of at least 51% of the economic interests represented by the equity owned by the
Investors (calculated immediately prior to the occurrence of such event) (whether through a merger,
consolidation, sale or transfer of the Investors’ interests or sale of assets) and the receipt by
the Investors of cash, cash equivalents or marketable securities; provided that, if at least 80% of
the economic interests represented by the equity owned by the Investors is transferred, regardless
of the consideration received, such event will be deemed to be a Qualified Change of Control.
“Securities Act” means the Securities Act of 1933, as amended from time to time.
“Subsidiary” means, with respect to any Person, any corporation, limited liability
company, partnership, association, or business entity of which (i) if a corporation, a majority of
the total voting power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation), a majority of
partnership or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination
thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association, or other business entity (other
than a corporation) if such Person or Persons shall be allocated a majority of limited liability
company,
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partnership, association, or other business entity gains or losses or shall be or control any
managing director or general partner of such limited liability company, partnership, association,
or other business entity. For purposes hereof, references to a “Subsidiary” of any Person
shall be given effect only at such times that such Person has one or more Subsidiaries, and, unless
otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Company.
“Transfer” means to sell, transfer, assign, pledge or otherwise dispose of (whether
with or without consideration and whether voluntarily or involuntarily or by operation of law).
9. Employment Provisions. Executive agrees that during the term of his employment
with the Company or its Subsidiaries, Executive shall report to the Chief Executive Officer of the
Company or the Board or their designees and shall devote his full business time and attention to
the business and affairs of the Company and its Subsidiaries. In the event that Executive is
terminated without Cause during the two year period commencing with the date of this Agreement, the
Company shall pay to Executive an aggregate amount equal to 1/2 of Executive’s annual base salary
in effect as of such termination, which amount shall be paid in equal installments in accordance
with the Company’s payroll practices over the six month period commencing with such termination.
10. Notices. Any notice provided for in this Agreement must be in writing and must be
either personally delivered, mailed by first class mail (postage prepaid and return receipt
requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the
address below indicated:
| If to the Company: | ||||||
| SPI Petroleum LLC | ||||||
| 0000 X.X. 00xx Xx., Xxxxx 000 | ||||||
| Xxxxxxxx Xxxx, XX 00000-0000 | ||||||
| Telephone: | (000) 000-0000 | |||||
| Telecopy: | (000-000-0000 | |||||
| Attention: | Chief Executive Officer | |||||
| with copies to: | ||||||
| To each of the Investors at the addresses below. | ||||||
| and | ||||||
| Xxxxxxxx & Xxxxx LLP | ||||||
| 000 Xxxx Xxxxxxxx Xxxxx | ||||||
| Xxxxxxx, XX 00000 | ||||||
| Telephone: | (000) 000-0000 | |||||
| Telecopy: | (000) 000-0000 | |||||
| Attention: | Xxxxxx X. XxXxxxxx, Xx. | |||||
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| If to Executive: | ||||||
| Xxxxxxx X. XxXxxxxx | ||||||
| 0000 Xxxxxxxxxx Xxxxx | ||||||
| Xxxxxxxx Xxxx, XX 00000 | ||||||
| Telephone: | (000) 000-0000, ext. 102 | |||||
| Telecopy: | (000) 000-0000 | |||||
| If to the Investors: | ||||||
| NCA Energy, Inc. | ||||||
| 0000 Xxxxx Xxxxxx, Xxxxx 0000 | ||||||
| Xxxxxxx, XX 00000 | ||||||
| Telephone: | (000) 000-0000 | |||||
| (000) 000-0000 | ||||||
| Attention: | X. Xxxxx Xxxxxxx | |||||
| Xxxxxxxx X. Xxxxxxxx | ||||||
| RBCP Energy Fund Investments, LP | ||||||
| c/o Cadent Energy Partners, LLC | ||||||
| 000 Xxxxxx Xxxxxx, 0xx Xxxxx | ||||||
| Xxxxxxxx, XX 00000 | ||||||
| Telephone: | (000) 000-0000 | |||||
| Telecopy: | (000) 000-0000 | |||||
| Attention: | Xxxxx Xxxxxxxxx | |||||
| Waud Capital Partners, L.P. | ||||||
| 000 Xxxxxxx Xxxxxx, Xxxxx 000 | ||||||
| Xxxx Xxxxxx, XX 00000 | ||||||
| Telephone: | (000) 000-0000 | |||||
| Telecopy: | (000) 000-0000 | |||||
| Attention: | Xxxxx X. Xxxx | |||||
| Xxxxx X. Xxxxxxxxxx | ||||||
| with a copy to: | ||||||
| Xxxxxxxx & Xxxxx LLP | ||||||
| 000 Xxxx Xxxxxxxx Xxxxx | ||||||
| Xxxxxxx, XX 00000 | ||||||
| Telephone: | (000) 000-0000 | |||||
| Telecopy: | (000) 000-0000 | |||||
| Attention: | Xxxxxx X. XxXxxxxx, Xx. | |||||
or such other address or to the attention of such other Person as the recipient party shall have
specified by prior written notice to the sending party. Any notice under this Agreement will be
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deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the
U.S. mail.
11. General Provisions.
(a) Transfers in Violation of Agreement. Any Transfer or attempted Transfer of any
Executive Securities in violation of any provision of this Agreement shall be void, and the Company
shall not record such Transfer on its books or treat any purported transferee of such Executive
Securities as the owner of such equity for any purpose.
(b) Severability. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other provision or any other jurisdiction, but this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision
had never been contained herein.
(c) Complete Agreement. This Agreement, those documents expressly referred to herein
and other documents of even date herewith embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreements or representations by or
among the parties, written or oral, which may have related to the subject matter hereof in any way.
(d) Counterparts. This Agreement may be executed in separate counterparts (including
by means of facsimile), each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
(e) Successors and Assigns. Except as otherwise provided herein, this Agreement shall
bind and inure to the benefit of and be enforceable by the parties hereto and their respective
successors and assigns (including subsequent holders of Executive Securities); provided
that the rights and obligations of Executive under this Agreement shall not be assignable except in
connection with a permitted transfer of Executive Securities hereunder.
(f) Choice of Law. The law of the State of Delaware will govern all questions
concerning the relative rights of the Company, its Subsidiaries and its securityholders. All other
questions concerning the construction, validity and interpretation of this Agreement and the
exhibits hereto will be governed by and construed in accordance with the internal laws of the State
of Delaware, without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
(g) Remedies. Each of the parties to this Agreement (and the Investors as third-party
beneficiaries) will be entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including attorney’s fees) caused by any breach of any provision
- 16 -
of this Agreement and to exercise all other rights existing in its favor. The parties hereto
agree and acknowledge that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
(h) Amendment and Waiver. The provisions of this Agreement may be amended and waived
only with the prior written consent of the Company and Executive and with Basic Investor Approval
(as defined in the LLC Agreement); provided that any amendment, modification, or waiver
which materially and adversely affects any Investor in a manner materially and adversely different
than another Investor shall also require the written consent of that Investor so materially and
adversely affected.
(i) Insurance. The Company, at its discretion, may apply for and procure in its own
name and for its own benefit life and/or disability insurance on Executive in any amount or amounts
considered available. Executive agrees to cooperate in any medical or other examination, supply
any information, and to execute and deliver any applications or other instruments in writing as may
be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that
he has no reason to believe that his life is not insurable at rates now prevailing for healthy men
of his age.
(j) Business Days. If any time period for giving notice or taking action hereunder
expires on a day which is a Saturday, Sunday or holiday in the state in which the Company’s chief
executive office is located, the time period shall be automatically extended to the business day
immediately following such Saturday, Sunday or holiday.
(k) Indemnification and Reimbursement of Payments on Behalf of Executive. The Company
and its Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the
Company or any of its Subsidiaries to Executive any federal, state, local or foreign withholding
taxes, excise taxes, or employment taxes (“Taxes”) imposed with respect to Executive’s
compensation or other payments from the Company or any of its Subsidiaries or Executive’s ownership
interest in the Company, including, without limitation, wages, bonuses, dividends, the receipt or
exercise of equity options and/or the receipt or vesting of restricted equity. In the event the
Company or its Subsidiaries does not make such deductions or withholdings, Executive shall
indemnify the Company and its Subsidiaries for any amounts paid with respect to any such Taxes,
together with any interest, penalties and related expenses thereto.
(l) Termination. This Agreement shall survive a Separation and shall remain in full
force and effect after such Separation.
(m) Adjustments of Numbers. All numbers set forth herein that refer to unit prices or
amounts will be appropriately adjusted to reflect unit splits, unit dividends, combinations of
units and other recapitalizations affecting the subject class of equity.
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(n) Deemed Transfer of Executive Securities. If the Company (and/or the Investors
and/or any other Person acquiring securities) shall make available, at the time and place and in
the amount and form provided in this Agreement, the consideration for the Executive Securities to
be repurchased in accordance with the provisions of this Agreement, then from and after such time,
the Person from whom such units are to be repurchased shall no longer have any rights as a holder
of such units (other than the right to receive payment of such consideration in accordance with
this Agreement), and such units shall be deemed purchased in accordance with the applicable
provisions hereof and the Company (and/or the Investors and/or any other Person acquiring
securities) shall be deemed the owner and holder of such units, whether or not the certificates
therefore have been delivered as required by this Agreement.
(o) No Pledge or Security Interest. The purpose of the Company’s retention of
Executive’s certificates and executed Security Powers is solely to facilitate the repurchase
provisions set forth in Section 3 and the provisions of Article 9 of the LLC
Agreement and does not constitute a pledge by Executive of, or the granting of a security interest
in, the underlying equity.
(p) Rights Granted to The Investors and their Respective Affiliates. Any rights
granted to the Investors and their Affiliates hereunder may also be exercised (in whole or in part)
by their designees (which may be Affiliates of Investors).
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Executive Unit Agreement on the date
first written above.
| SPI PETROLEUM LLC | ||||||
| By: | /s/ Xxxxx X. Xxxxxx | |||||
| Name: | Xxxxx X. Xxxxxx | |||||
| Its: | Chief Executive Officer | |||||
| /s/ Xxxxxxx X. XxXxxxxx | ||||||
| Xxxxxxx X. XxXxxxxx | ||||||
| NCA ENERGY, INC. | ||||||
| By: | /s/ Xxxxx Xxxxx | |||||
| Name: | Xxxxx Xxxxx | |||||
| Its: | Assistant Secretary | |||||
| RBCP ENERGY FUND INVESTMENTS, LP | ||||||
| By: | 2001 RBCP U.S. GP LIMITED | |||||
| Its: | General Partners | |||||
| By: | /s/ Xxxx X. Xxxxxx | |||||
| Name: | Xxxx X. Xxxxxx | |||||
| Its: | CEO | |||||
| WAUD CAPITAL PARTNERS, L.P. | ||||||
| By: | Waud Capital Partners, L.L.C. | |||||
| Its: | General Partner | |||||
| By: | /s/ Xxxxx X. Xxxx | |||||
| Name: | Xxxxx X. Xxxx | |||||
| Its: | Managing Partner | |||||
__, 2004
ELECTION TO INCLUDE SECURITIES IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned purchased Common Units (the “Common Units”) of SPI Petroleum LLC (the
“Company”) on April ___, 2004 (the “Closing Date”). Under certain circumstances,
the Company has the right to repurchase certain of the Units at cost from the undersigned (or from
the holder of the Common Units, if different from the undersigned) should the undersigned cease to
be employed by the Company and its subsidiaries or upon certain other events. Hence, the Common
Units are subject to a substantial risk of forfeiture and are non-transferable. The undersigned
desires to make an election to have the Units taxed under the provision of Code §83(b) at the time
he purchased the Common Units.
Therefore, pursuant to Code §83(b) and Treasury Regulation §1.83-2 promulgated thereunder, the
undersigned hereby makes an election, with respect to the Common Units (described below), to report
as taxable income for calendar year 2004 the excess (if any) of the Common Units’ fair market value
on April ___, 2004 over the purchase price thereof.
The following information is supplied in accordance with Treasury Regulation §1.83-2(e):
1. The name, address and social security number of the undersigned:
Xxxxxxx X. XxXxxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
SS#: ###-##-####
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
SS#: ###-##-####
2. A description of the property with respect to which the election is being made:
Common Units of the Company.
3. The date on which the property was transferred April ___, 2004. The taxable year for which
such election is made: calendar year 2004.
4. The restrictions to which the property is subject: .
5. The fair market value on April ___, 2004 of the property with respect to which the election
is being made, determined without regard to any lapse restrictions: $[___] per Common Unit.
6. The amount paid for such property: $0.01 per Unit.
A copy of this election has been furnished to the Secretary of the Company pursuant to
Treasury Regulations § 1.83-2(e)(7).
Dated: __, 2004
- 2 -
