EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement is made as of the 7th day of August,
1997 by and between United States Exploration, Inc., a Colorado corporation (the
"Company"), and Xxxxx X. Xxxxxx, a Colorado resident ("Executive").
The Company desires to employ Executive, and Executive desires to accept
employment with the Company, subject to the terms and conditions hereinafter set
forth. Accordingly, in consideration of the mutual covenants and agreements set
forth herein, the Company and Executive agree as follows:
1. Employment.
1.1 Engagement of Executive. The Company agrees to employ Executive,
and Executive agrees to accept employment by the Company, all in accordance with
the terms and conditions of this Agreement.
1.2 Duties and Powers.
(a) During the Employment Period (as defined below), Executive
will serve as the Company's President and Chief Executive Officer and will have
all of the responsibilities, duties and authority ordinarily associated with
those offices.
(b) During the Employment Period, Executive shall serve on the
Board of Directors of the Company (the "Board") and shall be the Chairman of the
Board. Executive acknowledges that, although the Board can initially appoint him
to the Board, only the shareholders can thereafter elect him to the Board. The
Company will cause Executive to be nominated for election to the Board on each
occasion on which directors are to be elected during the Employment Period.
(c) Executive shall also serve as the president and chief
executive officer and on the board of directors of each subsidiary of the
Company and shall hold comparable positions with respect to each other entity
controlled by the Company that is not a corporation.
1.3 Employment Period. Executive's employment under this Agreement
shall begin on the date hereof and shall continue to but excluding the third
anniversary of the date hereof (the "Initial Period"), unless extended as
provided in this Section 1.3. This Agreement and Executive's employment
hereunder shall automatically be extended for additional consecutive one-year
periods ("Renewal Periods") unless, at least 90 days prior to the end of the
Initial Period or any Renewal Period, either party gives written notice of
nonrenewal to the other. The Initial Period and the Renewal Periods are referred
to collectively as the Employment Period. Notwithstanding anything to the
contrary contained herein, the Employment Period is subject to termination
pursuant to Section 1.4.
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1.4 Termination.
(a) The Board has the right to terminate Executive's employment
under this Agreement, by notice to Executive in writing at any time. Any such
termination shall be effective upon the date of service of such notice pursuant
to Section 9.
(b) Executive shall have the right to terminate this Agreement in
the event that (i) he is at any time during the Employment Period actually or
constructively deprived of any of the titles, duties, responsibilities and
authority of the President, Chief Executive Officer and Chairman of the Board of
the Company or any of its subsidiaries, (ii) he is at any time during the
Employment Period not a member of the Board and the board of directors of each
subsidiary (following his initial election to the board of such subsidiary),
(iii) the Company fails to pay him any compensation or benefits to which he is
entitled hereunder within 15 days after written demand therefor, (iv) the
Company breaches any other covenant hereunder and such breach is not cured to
the reasonable satisfaction of Executive within 30 days after notice of breach
to the Company or (v) a "Change of Control" has occurred at any time after the
date of this Agreement. For that purpose, Executive shall be deemed to have been
constructively deprived of the duties, responsibilities and authority of the
President, Chief Executive Officer and Chairman of the Board of the Company or a
subsidiary if his duties, responsibilities and authority are altered in any way
so as to reduce the duties, responsibilities and authority exercised by him upon
commencement of the Employment Period. A "Change of Control" means: (v) the
acquisition by any entity, person or group (which theretofore beneficially owned
less than 35% of the Company's Common Stock) in one or more transactions of
beneficial ownership of 35% or more of the Company's Common Stock, where
beneficial ownership, the percentages of shares outstanding and the existence of
a group are determined pursuant to Sections 13(d) and (g) of the Securities
Exchange Act of 1934 and the rules and regulations promulgated thereunder; (w)
the merger or consolidation of the Company with one or more corporations in a
transaction or series of transactions in which the common stock of the Company
is exchanged for, or after which the common stock of the Company theretofore
outstanding constitutes, less than 60% of the voting stock of the resulting or
surviving corporation, including, without limitation, an exchange of the common
stock of the Company for cash or other property, or after which any entity,
person or group (which theretofore beneficially owned less than 35% of the
Company's Common Stock) beneficially owns 35% or more of the voting stock of the
resulting or surviving corporation, or after which 50% or more of the members of
the board of directors of the resulting or surviving corporation were not
members of the Board immediately prior to the transaction; (x) a change, during
any period of two consecutive years beginning on or after the date hereof, in
the membership of the Board so that 50% or more of the members of the Board were
not such members at the commencement of such two-year period; (y) the sale,
assignment, transfer, pledge, hypothecation or other disposition of assets
(except a pledge, hypothecation or other similar disposition made at the time
the Company enters into a bona fide financing transaction with a party which at
the time of such transaction is not an affiliate of the Company) of the Company
having a value, as determined by the Board in good faith, in excess of one-third
of the consolidated total assets of the Company or (z) approval by the
shareholders of the Company of a complete liquidation or dissolution of the
Company. Notwithstanding the foregoing, no acquisition of Common Stock
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by Executive or any entity controlled by him or any group of which he is a
member shall constitute or give rise to a Change of Control and any director who
is appointed or nominated for election to the Board with the approval of
Executive (which approval must be evidenced by Executive's vote in favor of such
appointment or nomination at a meeting or in a written consent of the Board)
shall be deemed to have been a member of the Board immediately prior to any
transaction and as of the commencement of any two-year period.
(c) This Agreement shall terminate automatically upon Executive's
death.
2. Compensation and Benefits.
2.1 Base Compensation. During the Employment Period, the Company will
pay Executive a base salary at a rate of not less than $150,000 per annum (the
amount actually being paid to Executive at any time being referred to as the
"Base Salary"), payable in accordance with the Company's regular payroll policy.
At least annually, the Board of Directors shall review Executive's Base Salary
and may, in their discretion, increase, but not decrease, Executive's Base
Salary. Upon termination of the Employment Period, the Base Salary for any
partial year will be pro rated based on the number of days elapsed in such year
during which the Employment Period had continued.
2.2 Discretionary Bonus. Following the end of each fiscal year, the
Board, in its sole discretion, may elect to cause the Company to award to
Executive a bonus (the "Discretionary Bonus") for such year, in an amount to be
determined by the Board in their sole judgment based upon the Executive's
performance.
2.3 Benefits. In addition to the Base Salary and any Discretionary
Bonus payable to Executive hereunder, Executive will be entitled to the
following benefits during the Employment Period, unless otherwise altered by the
Board with respect to all executives of the Company:
(a) Hospitalization, disability, life and health insurance, to
the extent offered by the Company, and in amounts consistent with Company
policy, for all key management employees, as reasonably determined by the Board;
(b) Reimbursement for reasonable, ordinary and necessary out-of-
pocket business expenses incurred by Executive in the performance of his duties,
subject to the Company's policies in effect from time to time with respect to
travel, entertainment and other expenses, including, without limitation,
requirements with respect to reporting and documentation of such expenses; and
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(c) Other benefit arrangements, including a 401(k) or similar tax
deferral plan, to the extent made generally available by the Company to its
executives and key management employees.
In addition, the Executive shall be eligible to participate in any stock option,
restricted stock, stock appreciation rights or other equity incentive plan from
time to time maintained by the Company for officers or employees.
2.4 Taxes, etc. All compensation payable to Executive hereunder is
stated in gross amount and shall be subject to all applicable withholding taxes
and any other amounts required by law to be withheld.
2.5 Options. Upon the date hereof, the Company shall grant to
Executive options (the "Options") to purchase shares of the Company's common
stock, $.0001 par value ("Common Stock"), as follows:
No. Shares Exercise Price
---------- --------------
1,000,000 $ 4.50
1,000,000 6.00
1,000,000 9.00
1,000,000 12.00
---------
4,000,000
=========
The Options with an exercise price of $4.50 per share and $6.00 per share shall
be exercisable immediately upon the date hereof. The Options with an exercise
price of $9.00 per share and $12.00 per share shall become exercisable upon the
first anniversary of the date hereof, subject to the terms of the Options. The
Options shall be in the form annexed hereto as Exhibit A with appropriate
completions to reflect the number of shares, the exercise price and the timing
of exercisability for each option.
3. Time Required; Other Interests; Corporate Opportunities.
(a) The Company acknowledges that Executive has a variety of
other business, civic, political and personal interests and will in the future
pursue additional business opportunities and civic, political and personal
interests. Executive shall be free to pursue such other interests and
opportunities and shall not be required to devote his full business time and
effort to the affairs of the Company hereunder. Executive shall be obligated to
devote to the Company's affairs only such time and effort as, in his reasonable,
good faith judgment, they require. It is understood that Executive will
generally oversee the operations of the Company during the term of this
Agreement, but will cause the operations to be conducted by employees of the
Company and employees of BMG (as defined below) pursuant to the Cost Sharing
Agreement (as defined below). The Company understands and agrees that Executive
may perform his obligations hereunder from any location and that he is not
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required to be present in the Company's offices for any particular amount of
time. In no event shall Executive's failure to devote a particular amount of
time to the Company's affairs or Executive's absence from the Company's offices
for any particular amount of time be deemed a breach of or failure to perform
his obligations hereunder. The Company may not require Executive to locate his
principal offices at any location other than the offices of BMG as contemplated
by Section 4.
(b) Executive's other interests include and may in the future
include oil and gas interests and operations. In order to avoid any uncertainty
as to the Company's right to participate in any other activities that Executive
may have or undertake under the "corporate opportunity" doctrine, the parties
have agreed that Executive will offer to the Company any opportunity to acquire
any Oil and Gas Interests (as defined below) of which Executive becomes aware
during the Employment Period and which Executive desires to pursue; provided,
however, that Executive shall not be obligated to offer to the Company any such
opportunity that exists or arises under any agreement to which Executive or any
entity controlled by him was a party as of the date hereof. If Executive does
not believe that the Company should pursue any such opportunity, and wishes to
pursue or cause an entity controlled by him to pursue such opportunity, he shall
give written notice of that fact to the Company, with a copy to each member of
the Board, describing the opportunity in reasonable detail. Executive shall
provide such additional information concerning the opportunity as any member of
the Board may reasonably request. The Company shall have a period of 15 days
after such notice to notify Executive of its decision to have the Company pursue
the opportunity. If the Company fails to give such notice within that 15-day
period, Executive or any other entity designated by him shall be free to pursue
the opportunity for his or its own account, with no further obligation to the
Company. Except as expressly provided in this Section 3(b), Executive shall have
no obligation to offer any business opportunity to the Company and shall be free
to pursue any such opportunity for his own account or the account of any other
entity, whether or not such opportunity might otherwise be deemed to be within
the scope of the Company's business. Without limiting the generality of the
foregoing, Executive shall not be obligated to offer any opportunity to acquire
any Oil and Gas Interest outside the Territory to the Company. As used in this
Section 3(b), (a) "Oil and Gas Interests" means any form of ownership of oil
and/or gas minerals or the right to receive a portion of the proceeds of sale
thereof and any facilities used in connection with the processing or
transportation thereof, and (b) "Territory" means the continental United States
of America except for the following: (i) Xxxxxx, Pawnee and Canadian Counties,
Oklahoma, (ii) the Denver-Julesburg Basin in Colorado and Wyoming, (iii) the
Piceance Basin in Colorado, and (iv) oil and gas properties owned directly or
indirectly by Executive or by any entity in which Executive owns an interest as
of the date of this Agreement ("Existing Properties"), any property subject to
an area of mutual interest or similar provision relating to an Existing Property
and any property that directly adjoins an Existing Property.
4. Use of BMG Facilities and Personnel; Cost Sharing Agreement. Executive
is the sole shareholder of Xxxxxx Mineral Group, Inc. ("BMG"). BMG has offices
in Denver, Colorado that are equipped with systems designed for oil and gas
operations which are superior to the systems presently used by the Company. BMG
also has a number of employees with expertise needed by the Company to
effectively conduct its operations and pursue existing opportunities. In
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order to avail itself of BMG's facilities, systems and personnel, the Company
shall locate its principal executive offices at the offices of BMG. Executive
may cause officers and employees of BMG to provide services to the Company, and
may cause the Company to use the systems and facilities of BMG, in each case in
such areas, in such manner and to such extent as he deems appropriate in his
sole discretion. The Company shall bear all costs of relocating its principal
executive offices to BMG's offices, including any modifications in BMG's offices
or systems reasonably necessary to accommodate that change. Executive shall
determine, in his sole discretion, whether new or existing personnel shall be
employees of BMG or of the Company and may cause all such employees to be paid
by a common paymaster. In the event that the addition of the Company's
operations to the BMG offices now or in the future requires additional
facilities or systems, Executive shall determine, in his sole discretion,
whether such facilities and systems shall be procured for the Company or for
BMG. Contemporaneously with the execution of this Agreement, the Company and BMG
are entering into a Cost and Expense Sharing Agreement (the "Cost Sharing
Agreement") pursuant to which they will share and allocate the expenses of BMG's
offices, equipment and personnel. No compensation paid to Executive by the
Company or BMG shall be shared under the Cost and Expense Sharing Agreement.
Nothing contained in this Agreement or the Cost Sharing Agreement shall obligate
BMG to provide or the Company to use any particular facilities, systems or
services of BMG.
5. Life Insurance. The Company may at its discretion and at any time apply
for and procure as owner and for its own benefit and at its own expense,
insurance on the life of Executive in such amounts and in such form or forms as
the Company may choose. Executive shall cooperate with the Company in procuring
such insurance and shall, at the request of the Company, submit to such medical
examinations, supply such information and execute such documents as may be
required by the insurance company or companies to whom the Company has applied
for such insurance. Executive shall have no interest whatsoever in any such
policy or policies, except that, upon the termination of Executive's employment
hereunder, Executive shall have the privilege of purchasing any such insurance
from the Company for an amount equal to the actual cash surrender value thereof
on the date of termination.
6. Arbitration. Any dispute between the parties with respect to this
Agreement shall be submitted to binding arbitration in Denver, Colorado pursuant
to the rules of the American Arbitration Association then in force before the
Judicial Arbiter Group. If the Judicial Arbiter Group is not available to
conduct the arbitration, the arbitration shall be before another arbitrator
mutually acceptable to the parties or, if the parties are unable to agree,
before the American Arbitration Association. The Company shall pay all costs of
the arbitration proceedings, including all attorneys fees and other costs
incurred by both the Company and Executive in preparing for and participating in
the arbitration; provided, however, that if the arbitration was commenced by
Executive and the arbitrators determine that Executive's claims in the
arbitration, taken as a whole, were made in bad faith and lacked colorable legal
merit, they may order Executive to pay his own legal fees and other costs
incurred by him in preparing for and participating in the arbitration. The
arbitrators shall have the power to award any legal or equitable remedies that
would be available in proceedings conducted before a state or federal court of
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competent jurisdiction in Denver, Colorado. Judgment on the award of the
arbitrators may be entered in any court of competent jurisdiction. All
arbitration proceedings and the results thereof shall be confidential, except to
the extent that any party is required to make disclosure concerning such
proceedings under applicable law.
7. Assignment. No party hereto may assign or delegate any of its rights or
obligations hereunder. Except as otherwise expressly provided herein, all
covenants and agreements contained in this Agreement by or on behalf of any of
the parties shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
8. Severability. Whenever possible, each provision of this Agreement shall
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 prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
9. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given if (i) delivered personally
to the recipient, (ii) sent to the recipient by a reputable express courier
service (charges prepaid) or mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid, or (iii) transmitted by
telecopy to the recipient with a machine confirmation of transmission. Such
notices, demands and other communications shall be sent to the addresses or
telecopier numbers indicated below:
(a) If the Employee:
Xxxxx X. Xxxxxx
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
(b) If to Company:
United States Exploration, Inc.
0000 X. 000xx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attn: Secretary
Facsimile No.: (000) 000-0000
Either party may change its address or telecopier number for notice purposes by
written notice to the other party. Any notice so sent shall be deemed to have
been received, notwithstanding the date or fact of actual receipt, (w) the date
such notice is personally delivered, (x) the earlier of the date indicated on
the return receipt or four business days after the date of mailing if sent by
certified or registered mail, (y) one business day after the date of delivery to
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the overnight courier if sent by overnight courier or (z) the day of
transmission by telecopy or, if the day of transmission is not a business day in
the jurisdiction where the recipient's telecopier is located, the next business
day.
10. Entire Agreement. This Agreement and the Cost Sharing Agreement set
forth the entire understanding of the parties, and supersede and pre-empt all
prior oral or written understandings and agreements, with respect to the subject
matter hereof and thereof. No modification, termination or attempted waiver of
this Agreement shall be valid unless in writing and signed by the party against
whom the same is asserted.
11. Waiver. Either party's failure to enforce any provision of this
Agreement shall not be construed as a waiver of that provision or any other
provision as to that or any future violations thereof, nor prevent that party
thereafter from enforcing each and every provision of this Agreement. The rights
granted the parties herein are cumulative and the waiver by a party of any
single remedy shall not constitute a waiver of such party's right to assert all
other legal remedies available under the circumstances.
12. No Conflict. Executive represents and warrants that Executive is not
subject to any agreement, order, judgment or decree of any kind which would
prevent Executive from entering into this Agreement or performing fully his
obligations hereunder.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the laws
of the State of Colorado, without giving effect to provisions thereof regarding
conflict of laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
UNITED STATES EXPLORATION, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
--------------------------------
Its: President
--------------------------------
/s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx
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EXHIBIT A
FORM OF OPTION
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