Exhibit 10.5
QUEST RESOURCE CORPORATION
EMPLOYMENT AGREEMENT
[XXXXX X. XXXX]
THIS EMPLOYMENT AGREEMENT is effective the 7th day of November, 2002, by
and between QUEST RESOURCE CORPORATION, a Nevada corporation (hereinafter
referred to as "Employer"), and Xxxxx X. Xxxx (hereinafter referred to as
"Employee").
WHEREAS, Employer desires to employ Employee in the capacity of Chairman
of the Board, Co-Chief Executive Officer, Chief Financial Officer, Secretary and
Treasurer;
WHEREAS, Employee desires to be employed by Employer in the aforesaid
capacity; and
WHEREAS, Employer and Employee desire to set forth in writing the terms
and conditions of their agreements and understandings.
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Term of Employment.
1.1 Employer shall employ Employee in the capacity set forth in
Section 2. This Employment Agreement shall replace all employment
agreements, if any, entered into between Employer and Employee prior to the
effective date of this Employment Agreement. Employee's employment under
this Agreement shall terminate thirty-six (36) months after the date of
this Agreement.
1.2 This Agreement may be terminated in accordance with the provisions
of Sections 11.1 [termination for cause or violation of agreement], 11.2
[severance pay], 11.3 [termination by Employee] and 11.4 [mutual written
agreement]. Sections 6 [disclosure of materials], 7 [non-compete], 8
[accounting], 9 [return of materials], 10 [reasonableness], 17 [assistance
after termination] and 18 [change of control] shall survive the termination
of this Agreement.
2. Duties of Employee.
2.1 The Employee will serve as Chairman of the Board, Co-Chief
Executive Officer, Chief Financial Officer, Secretary and Treasurer of the
Employer and will have such authority and responsibility as are customarily
conferred on a co-chief executive officer of a corporation; provided,
however, the Employee acknowledges that (i) Xxxxxxx X. Xxxx (or his duly
appointed successor) will be the other Co-Chief Executive Officer (the
"Other CEO") who will have similar authorities and responsibilities as the
Employee but whose non-exclusive emphasis will be in the areas of
management of operations and personnel, (ii) the Employee's non-exclusive
emphasis will be in the areas of banking, finance, promotion and
acquisition evaluation and (iii) the Employee and the Other CEO
will consult with each other and agree upon any decision, action or
inaction that is material to the Employer or any of its subsidiaries (and
neither the Employee nor the Other CEO shall make any decision or take or
fail to take any such action without such agreement).
2.2 The principal place of the Employee's employment hereunder shall
be in Oklahoma City, Oklahoma, subject to such business travel as may be
reasonably necessary in connection with the Employee's performance of his
duties to the Employer; provided that the Employer shall take all
reasonable actions to allow the Employee to perform his duties to the
Employer from Oklahoma City, Oklahoma. Employee shall also be provided with
an executive office in Employer's Benedict, Kansas office.
2.3 The Employee will devote his time, attention, skill, and energy
exclusively to the business of the Employer, will use his best efforts to
promote the success of the Employer's business, and will cooperate fully
with the Board of Directors in the advancement of the best interests of the
Employer. Nothing in this Section 2, however, will prevent the Employee
from engaging in additional activities in connection with personal
investments and community affairs that are not inconsistent with the
Employee's duties under this Agreement.
2.4 If the Employee is elected as a director of the Employer or as a
director or officer of any of its subsidiaries, the Employee will fulfill
his duties as such director or officer without additional compensation.
2.5 The Employer shall amend its Articles of Incorporation and Bylaws,
and take all other necessary action, to implement the delegations of
authority and responsibility contemplated by this Section 2.
3. Salary. As compensation for all services to be rendered for Employer by
Employee under this Agreement, Employee shall be paid an annual salary of One
Hundred Twenty Thousand Dollars and No/100 ($120,000.00) payable in equal
bi-weekly payments, and such salary shall be prorated at commencement or
expiration of the term in the event that the first or last pay period is less
than a bi-weekly period. Any additional salary increments and the times and
amounts of such shall be in the sole discretion of the Board of Directors of the
Employer.
4. Additional Benefits.
4.1 In addition to, and not in limitation of the compensation referred
to in Section 3 hereof, the Employer shall provide Employee and Employee's
family with comprehensive medical and dental insurance coverage and shall
provide Employee with disability insurance coverage.
4.2 In addition, Employee shall participate in Employer's Profit
Sharing Plan during the term of this Agreement.
4.3 At Employer's expense, the Employer will provide the Employee a
leased automobile, equivalent to a Chevrolet Suburban, with cellular
telephone. The Executive
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must file expense and other reports with respect to such automobile in
accordance with the Employer's policies.
4.4 The Employer shall provide the Employee with a group term life
insurance policy similar to that provided for the President of the
Employer.
5. Reimbursement of Business Expenses. Employee is hereby authorized by
Employer to incur reasonable, ordinary and necessary business expenses for
promoting Employer's business, including expenditures for travel and
entertainment. Employer shall reimburse Employee for all such business expenses,
provided that Employee submits to Employer an account book, diary, or similar
record in which Employee has recorded, at or near the time each expenditure was
made, (i) the amount of the expenditure, (ii) the time, place, and nature of the
travel or entertainment expense, (iii) the business reason for the expenses and
the business benefit derived or expected to be derived therefrom, and (iv) the
names, occupations, and other data concerning individuals entertained sufficient
to establish their business relationship with Employer. The right to
reimbursement is also subject to the requirements that Employee submit to
Employer supporting documents, such as receipts or paid bills, sufficient to
establish the amount, date, place, and essential character of (i) any
expenditure for lodging while traveling away from home and (ii) any other
expenditure of Twenty-Five Dollars ($25.00) or more. Employee will be reimbursed
for all expenses incurred in business travel to Employer's Benedict, Kansas
office, including mileage (if in personal vehicle), overnight accommodations,
and meal expense.
6. Disclosure of Information. Employee acknowledges that, in and as a
result of his employment hereunder, he will be acquiring confidential
information regarding Employer's business plan, operations, and potential
acquisitions. As a material inducement to Employer to enter into this Agreement,
and to pay to Employee the compensation referred to in Section 3 hereof (as well
as the additional benefits referred to in Section 4 hereof), Employee covenants
and agrees that he shall not, at any time during the term of his employment
hereunder or after the termination of Employee's employment hereunder for any
reason, directly or indirectly, use, divulge or disclose, for any purpose
whatsoever, any of such confidential information which has been obtained by or
disclosed to him as a result of his employment by Employer.
In the event of a breach or threatened breach by the Employee of any of
the provisions of this Section 6, Employer, in addition to and not in limitation
of any other rights, remedies or damages available to Employer at law or in
equity, shall be entitled to a temporary and permanent injunction in order to
prevent or to restrain any such breach by Employee, or by Employee's partners,
agents, representatives, servants, employers, employees and/or any and all
persons directly or indirectly acting for or with him.
7. Covenants Against Competition. Employee acknowledges that his services
to be rendered hereunder are of a special and unusual character which have a
unique value to Employer, the loss of which cannot adequately be compensated by
damages in an action at law. In view of the unique value to Employer of the
services of Employee for which Employer has contracted hereunder, and because of
the confidential information to be obtained by or disclosed to Employee, as
hereinabove set forth, and as a material inducement to Employer to enter into
this Agreement, and to pay to Employee the compensation referred to in Section 3
hereof,
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Employee covenants and agrees that, during the term of employment and for any
period that Employee is receiving severance pay from the Employer, the Employee
shall not, directly or indirectly, either individually or as an employee,
consultant or contractor of others, engage in any business the same or similar
to the business of Employer in any geographic area in which Employer is doing
business (a "Competitive Business"); provided, however, that, if Employee
presents a business opportunity to the Employer that would otherwise constitute
a Competitive Business and the Employer passes on that opportunity, then
Employee may engage in that Competitive Business notwithstanding the
restrictions set forth herein.
In the event of a breach or threatened breach by the Employee of any of
the provisions of this Section 7, Employer, in addition to and not in limitation
of any other rights, remedies or damages available to Employer at law or in
equity, shall be entitled to a temporary and permanent injunction in order to
prevent or to restrain any such breach by Employee, or by Employee's partners,
agents, representatives, servants, employers, employees and/or any and all
persons directly or indirectly acting for or with him.
8. Accounting for Profits. Employee covenants and agrees that, if he shall
violate any of his covenants or agreements under Sections 6 or 7 hereof,
Employer shall be entitled to an accounting and repayment of all profits,
compensation, commissions, remunerations or benefits which Employee directly or
indirectly has realized and/or may realize as a result of, growing out of or in
connection with any such violation; such remedy shall be in addition to and not
in limitation of any injunctive relief or other rights or remedies to which
Employer is or may be entitled at law or in equity or under this Agreement.
9. Return of Materials. Employee agrees that upon the termination of this
employment with Employer he will promptly return to Employer all manuals,
records, materials and other papers pertaining to transactions handled by
Employee, or pertaining to Employer's business and all copies of the same.
10. Reasonableness of Restrictions.
10.1 Employee has carefully read and considered the provisions of
Sections 6, 7, 8 and 9 hereof and, having done so, agrees that the
restrictions and agreements set forth in such Sections (including, but not
limited to, the time period or restriction) are fair and reasonable and are
reasonably required for the protection of the interests of Employer, its
officers, directors and other employees.
10.2 In the event that, notwithstanding the foregoing, any of the
provisions of Sections 6, 7, 8 and 9 hereof shall be held to be invalid or
enforceable, the remaining provisions thereof shall nevertheless continue
to be valid and enforceable as though the invalid and unenforceable parts
had not been included therein. In the event that any provision of Sections
6 or 7 relating time period and/or areas of restriction shall be declared
by a court of competent jurisdiction to exceed the maximum time period
and/or areas such court deems reasonable and enforceable, said time period
and/or areas of restriction shall be deemed to become and thereafter be the
maximum time period and/or areas which such court deems reasonable and
enforceable.
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11. Termination of Employment.
11.1 Nothing in this Agreement shall be construed to prevent Employer
(by action of its Board of Directors) from terminating Employee's
employment under and pursuant to this Agreement at any time for cause.
Termination of Employee's employment under this Section shall not
constitute a breach of this Agreement by Employer, and shall relieve
Employer of any and all obligation to pay any compensation provided by
Section 3 and Section 4 for any period after the date of such termination.
Termination of Employee's employment under this Agreement for cause
shall be limited to, the following:
(a) material breach by the Employee of any material term of this
Agreement, which breach has not been cured by the Employee within ten
(10) business days of notice of such breach from the Board of
Directors of the Employer;
(b) fraud, misappropriation or embezzlement by Employee in
connection with his employment under this Agreement or otherwise;
(c) the use by Employee of illegal narcotic substances;
(d) the immoderate use of alcoholic beverages by Employee which
interferes with the performance of Employee's duties under this
Agreement; and
(e) the failure or inability of Employee, for a minimum
continuous sixty (60) day period, to work or to comply with the
reasonable employment requirements established for Employee from time
to time by the Board of Directors of Employer.
11.2 Other than a termination following a Change of Control as
provided in Section 18 hereunder, in the event that Employee's employment
under this Agreement is terminated by the Employer for any reason other
than for cause as described in Section 11.1 above, then Employee shall be
entitled to severance pay in an amount equal to the salary payable to
Employee under the terms of Section 3 hereof for the greater of (a) a
period of twelve (12) months from the date of termination of this Agreement
or (b) the unfinished term of this Agreement under Section 1.1. In
addition, Employer shall continue to provide comprehensive medical and
dental insurance benefits to Employee and Employee's family and disability
insurance coverage to Employee during the severance period. The severance
payments provided hereunder shall be in lieu of and in complete
substitution for all compensation which would have been due and owing to
Employee for the remainder of the then current employment term. Any
severance pay or benefits due under the terms of this Section shall be
subject to withholding for federal, state, and local taxes, as applicable.
11.3 This Agreement may be terminated by Employee upon one hundred
eighty (180) days written notice to Employer. After such termination date,
all compensation described in Sections 3 and 4 hereof shall cease, other
than the Employee's vested rights
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in the Profit Sharing Plan. The rights of Employee under the other
benefit plans of Employer shall be governed as provided in the
respective plans.
11.4 This Agreement may be terminated by the written agreement of the
parties hereto.
12. Burden and Benefit. This Agreement shall be binding upon and shall
inure to the benefit of Employer and Employee, and their respective heirs,
personal and legal representatives, successors and assigns.
13. Governing Law. It is understood and agreed that the construction and
interpretation of this Agreement shall at all times and in all respects be
governed by the laws of the State of Kansas.
14. Severability. The provisions of this Agreement (including particularly,
but not limited to, the provisions of Sections 6, 7, 8 and 9 hereof) shall be
deemed severable, and the invalidity or unenforceability of any one or more of
the provisions hereof shall not affect the validity and enforceability of the
other provisions hereof.
15. Notices. Any notice required to be given hereunder shall be sufficient
if in writing, and sent by certified or registered mail, return receipt
requested, first-class postage prepaid, to his residence in the case of
Employee, and to its principal office in the State of Oklahoma in the case of
Employer.
16. Entire Agreement. This Agreement contains the entire agreement and
understanding by and between Employer and Employee with respect to the
employment herein referred to, and no representations, promises, agreements or
understandings, written or oral, not herein contained shall be in force or
effect.
No amendment or modification hereof shall be valid or binding unless the
same is in writing and signed by the party intended to be bound. No waiver of
any provision of this Agreement shall be valid unless the same is in writing and
signed by the party against whom such waiver is sought to be enforced; moreover,
no valid waiver of any other provision of this Agreement at any time shall be
deemed a waiver of any other provision of this Agreement at such time or will be
deemed a valid waiver of such provision at any other time.
17. Voluntary Assistance to Employer After Expiration or Termination of
Employment. Following the expiration or termination of Employee's employment
with Employer, Employee shall voluntarily cooperate with and assist Employer,
its accountants and legal counsel, in investigating, analyzing, defending or
otherwise assisting or cooperating with Employer in any pending or future claims
against or involving Employer and any of its affiliated entities, employees,
officers and directors; provided, that Employer shall reimburse Employee for
Employee's reasonable out-of-pocket expenses. Employer's requests for assistance
hereunder shall be reasonable as to timing and duration and shall be subject to
the time requirements of any other employment obligations of Employee. With the
exception of disclosures required by subpoena or other mandatory legal process,
Employee also agrees (1) to maintain in strict confidence any information or
knowledge held by Employee regarding pending or future claims against or
involving Employer, and (2) not to communicate with any party or
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governmental agency adverse to Employer, or with a representative, agent or
legal counsel for any such party or agency, concerning any pending or future
claims or litigation, without Employer's written consent and the presence of
legal counsel for Employer.
18. Termination of Employment Following a Change of Control.
18.1 Definitions relating to Termination of Employment following a
Change of Control.
(a) Change of Control. For purposes of this Section 18, a "Change
of Control" shall occur if at any time any of the following events
shall occur:
(i) the sale or disposition, in one or a series of related
transactions, of all or substantially all of the assets of the
Employer to any "person" other than Employee or Xxxxxxx X. Xxxx.
(ii) any person other than Employee or Xxxxxxx X. Xxxx is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the total voting power of the Employer, including by
way of purchase of shares, merger, consolidation or otherwise.
(iii) Employee and Employee's designees no longer constitute
at least 50% of the membership of the Employer's board of
directors.
(iv) Unless otherwise set forth herein, the date of a Change
of Control shall be the closing date of such sale or disposition
provided in (i) above, the date of such purchase, acquisition,
merger, reorganization, consolidation or other acquisition of
shares provided in (ii) above, or the date of the change in board
membership provided in (iii) above.
(b) Termination or Constructive Termination. In the event of a
Change of Control followed by a termination or Constructive
Termination within two (2) years of the Change of Control and during
the term of employment hereunder, the Employee shall be entitled to
the Severance Compensation as defined in Section 18.2. A Constructive
Termination shall occur in any of the following events:
(i) Failure to elect, reelect or otherwise maintain the
Employee in the offices or positions in the Employer which the
Employee holds under this Agreement;
(ii) A significant adverse change in the nature or scope of
the authorities, powers, functions, responsibilities or duties
attached to the positions with the Employer which the Employee
holds under this Agreement; or a reduction in the Employee's
salary; or the termination of the Employee's rights to any
substantial employee benefits to which he was entitled
immediately before the Change of Control or a substantial
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reduction in scope or value thereof; in each case, without the
prior written consent of the Employee, and which is not remedied
within ten (10) calendar days after receipt by the Employer of
written notice from the Employee of such change, reduction or
termination, as the case may be;
(iii) Failure to elect Employee to the Board of Directors of
the Employer;
(iv) The liquidation, dissolution or transfer (by merger,
consolidation, reorganization or otherwise) of all or
substantially all of the Employer's business and/or assets,
unless the successor or successors of the Employer shall have
assumed all duties and obligations of the Employer under this
Agreement;
(v) The Employer shall relocate its principal executive
offices, or require the Employee to have his principal location
of work changed to any location which is in excess of twenty-five
(25) miles from the location thereof immediately before the
Change of Control or the Employer shall require the Employee to
travel away from his office in the course of discharging his
responsibilities or duties hereunder significantly more (in terms
of either consecutive days or aggregate days in any calendar
year) than was required of him before the Change of Control
without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Employer
or any successor thereto.
18.2 Severance Compensation. In the event of a termination or
Constructive Termination within two (2) years of a Change of Control during
the term of employment hereunder, the Employee shall be entitled to the
following rights and the Employer shall pay to the Employee the following
amounts after the date (the "Termination Date") that the Employee's
employment is terminated:
(a) The Employer shall pay the Employee in cash a lump sum
payment (the "Lump Sum Payment") in an amount equal to (i) 2.99
multiplied by (ii) an amount equal to one full year's aggregate salary
under Section 3. In addition, the Employer shall pay an amount (the
"Excise Tax Reimbursement Payment") necessary to reimburse the
Employee for any federal excise tax imposed on him under Section
4999(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
or any successor Section of the Code as a result of the Employee's
receipt of the Lump Sum Payment; however, such Excise Tax
Reimbursement Payment shall not reimburse the Employee for (i) any
other federal or state income tax payable as a result of the receipt
of the Lump Sum Payment or the Excise Tax Reimbursement Payment or
(ii) any federal excise tax imposed as a result of the Employee's
receipt of the Excise Tax Reimbursement
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Payment. Such Lump Sum Payment and Excise Tax Reimbursement
Payment shall be payable within ten (10) business days from the
Termination Date; and
(b) The Employer shall provide the Employee and the Employee's
family with medical, dental and disability insurance benefits in the
same or substantially similar amounts as were in effect before the
Change of Control (or in such amounts as have been agreed to in
writing by the Employee after the Change of Control) for a period of
twelve (12) months following the Termination Date or until the
Employee becomes reemployed in a position in which his salary and
benefits are substantially similar to those in effect on the
Termination Date, whichever is earliest. In the event the Employee
becomes re-employed during the twelve-month period following the
Termination Date, the Employer's obligations to maintain medical,
dental and disability insurance under this Subsection 18.2(c) shall
cease and terminate upon such reemployment.
The payments provided pursuant to Section 18.2(a) shall be in lieu of and
in complete substitution for all compensation which would have been due
and owing to Employee for the remainder of the then current employment
term and any severance pay pursuant to Section 11.2 hereof. Any payments
or benefits due under the terms of this Section 18.2 shall be subject to
withholding for federal, state, and local taxes, as applicable.
18.3 No Mitigation Obligation. The parties understand that it may be
difficult for the Employee to find reasonably comparable employment
following the Termination Date. Accordingly, the parties hereto agree that
the payment of the Severance Compensation by the Employer to the Employee
will be liquidated damages, and that the Employee shall not be required to
mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall any profits, income,
earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Employee.
19. Arbitration. Except for claims or disputes arising under Sections 6
[disclosure of materials], 7 [non-compete], 8 [accounting], 9 [return of
materials], 10 [reasonableness], all claims, disputes and questions of any
nature arising out of or relating to this Agreement or any breach hereof shall
be resolved by arbitration conducted in Oklahoma City, Oklahoma. Except as
provided herein to the contrary, all arbitration proceedings shall be conducted
according to the rules of the American Arbitration Association then in effect
unless the parties hereto shall otherwise agree, in writing.
The terms of this Section shall be specifically enforceable under the
prevailing arbitration law. The award of a majority of the arbitrators shall be
conclusive, final and binding upon the parties and judgment may be entered upon
such award in accordance with the applicable law in any court of competent
jurisdiction.
Any party may invoke the terms of this Section by giving written notice
thereof to the other party, delivered by first class mail to the last known
address of such other party. Such notice shall, with specificity, set forth the
nature of the dispute, shall name one arbitrator and shall be signed by the
party requesting arbitration.
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Within fifteen days after receipt of such notice, the other party shall
deliver a signed written notice to the first party naming a second arbitrator.
If the other party fails to timely select a second arbitrator, the first
arbitrator shall be the sole arbitrator and shall decide all disputes pursuant
to the terms of this Section. If a second arbitrator is timely selected, the two
named arbitrators shall, within fifteen days after delivery of the notice
selecting the second arbitrator, select a third arbitrator.
If the two arbitrators are unable to agree on a third arbitrator, the
third arbitrator shall be selected by the President of the Oklahoma City,
Oklahoma Bar Association or any successor organization. In order to qualify as
an arbitrator, the person named must be licensed to practice law in the State of
Oklahoma and must not be (i) counsel to Employer or Employee or (ii) related, by
marriage or by blood to the second degree to Employee, any employee or
shareholder of Employer or any employee, shareholder, owner, partner, or
associate of any firm or entity with which Employee becomes associated after
termination of this Agreement.
The expense of the arbitration proceeding shall be borne by the Employer
except each party shall bear the cost of his own experts, evidence, and counsel
fees; provided, however, that the arbitrators may order the fees and expenses of
the substantially prevailing party paid by the other party, to the extent
allowed under applicable law.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement under seal as of the day, month and year first above written.
EMPLOYER: QUEST RESOURCE CORPORATION,
a Nevada corporation
By: /s/ Xxxxxxx X. Xxxx
------------------------------------------
Xxxxxxx X. Xxxx, President
EMPLOYEE: /s/ Xxxxx X. Xxxx
---------------------------------------------
Xxxxx X. Xxxx
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