EMPLOYMENT AGREEMENT
EMPLOYMENT
AGREEMENT, dated as of June 23, 2008 (this “Agreement”), by and between Sonterra
Resources, Inc., a Delaware corporation (the “Company”), and Xxxxxx X.
Xxxxxxxxxx (the “Employee”).
RECITAL
The
Company desires to engage Employee’s services, and Employee desires to perform
such services, upon the terms, and subject to the conditions, set forth
herein.
NOW,
THEREFORE, in consideration of the covenants and promises contained herein,
the
compensation and benefits received by the Employee from the Company and the
access given the Employee to the Company’s confidential information and the
Company’s customers, and for other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, and with the Company’s
recognition of the knowledge and expertise provided by the Employee being
acknowledged, the Company and the Employee hereby agree as follows:
1. Term
of Employment.
Subject
to the termination provisions set forth herein, the initial term of this
Agreement and the Employee’s employment hereunder shall be for a term of two (2)
years from the date of this Agreement (the “Initial Term”). This Agreement shall
thereafter be automatically extended for additional successive one (1) year
terms unless either party gives written notice of termination to the other
party
not less than ninety (90) days prior to the end of any term (in which event
this
Agreement shall terminate effective as of the close of the then existing
Employment Term). The Initial Term of this Agreement and any additional terms
as
extended in accordance with this Section 1 are collectively referred to in
this
Agreement as the “Employment Term.”
2. Position
and Duties.
(a) During
the Employment Term, the Employee shall serve as President and Chief Executive
Officer. The Employee shall have such duties, functions, responsibilities,
and
authority as are from time to time delegated to the Employee by the Board
of
Directors of the Company (the “Board”) or are otherwise consistent with the
duties, responsibilities and authority of the executive office held by the
Employee; provided that with respect to any specifically delegated duties,
functions, responsibilities and authority, such duties, functions,
responsibilities, and authority are reasonable and customary for a person
serving in the office/position of a public company comparable to the Company.
(b) During
the Employment Term, the Employee shall: (i) devote substantially all of
his
time during normal business hours to the business of the Company, fulfill
his
duties and obligations under this Agreement and use his best efforts, judgment
and energy to perform, improve and advance the business and interests of
the
Company in a manner consistent with the duties of his position; provided,
however, that Employee shall not be prevented from serving as a member of
the
board of directors of a corporation if the Company determines that such
membership is not adverse to its interests; (ii) not engage in any business
activities that are directly or indirectly competitive with any business
conducted by the Company or any of its subsidiaries or affiliates; (iii)
observe
and carry out such reasonable rules, regulations, policies, directions and
restrictions as may be established from time to time by the Board, including
but
not limited to, the standard policies and procedures of the Company as in
effect
from time to time; and (iv) do such traveling as may be required in connection
with the performance of such duties and responsibilities.
(c) The
Employee acknowledges that this Agreement contains a non-disclosure of
proprietary information and non-competition provisions, and the Employee
agrees
to comply with these provisions. The Employee understands that entering into
and
complying with these provisions is a condition to the Employee’s continued
employment with the Company and that failure to comply with the terms of
these
provisions may result in immediate termination from employment.
(d) In
connection with the Employee’s employment by the Company under this Agreement,
the Employee shall be based at the principal executive offices of the Company,
except for such reasonable travel as the performance of the Employee’s duties in
the business of the Company may require. Notwithstanding the foregoing, the
Board may, in its discretion, determine to relocate the principal offices
of the
Company for any necessary business purpose, and doing so shall not be a breach
of this Agreement.
3. Hours
of Work.
The
Employee’s normal days and hours of work shall coincide with the Company’s
regular business hours. The nature of the Employee’s employment with the Company
requires flexibility in the days and hours that the Employee must work, and
may
necessitate that the Employee work on other or additional days and hours.
The
Company reserves the right to require the Employee, and the Employee agrees,
to
work during other or further days or hours than the Company’s normal business
hours.
4. Compensation
and Benefits.
(a) Base
Salary.
During
the Employment Term, the Employee shall accrue base salary on a daily basis
at a
rate equal to $200,000 per year (“Base Salary”) for his services to the Company.
All Base Salary shall be paid as set forth in Section 4(f) hereof. The
Employee’s Base Salary may be subject to such adjustments as may be determined
from time to time by the Board in its sole discretion; provided,
however,
in no
event shall the Employee’s Base Salary be reduced unless such reduction is part
of a salary reduction applicable to all similarly situated employees of the
Company based upon the Company’s financial condition.
(b) One-Time
Sign-on Bonus.
The
Employee shall receive a one-time, lump-sum, sign-on bonus in the gross amount
of $70,000 (the "Sign-On Bonus"), payable in cash upon his signing this
Agreement. If the Employee’s employment with the Company ends for any reason
prior to March 31, 2009, then the Employee shall immediately repay to the
Company the full amount of the Sign-On Bonus.
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(c) Stock
Options.
The
Employee shall be eligible to receive awards of options (“Options”) to purchase
common stock of the Company (“Common Stock”) pursuant to and in accordance with
the terms and conditions set forth in any option plan adopted by the Board
in
its sole discretion (the “Option Plan”). The decision whether or not to award
stock options under the Option Plan, if adopted, to the Employee, and the
amount
of any such award, shall be within the sole discretion of the Company. The
definitive terms and conditions of the Options shall be set forth in a separate
option agreement to be entered into by the Employee and the Company (the
“Option
Agreement”). To the extent there is any inconsistency or conflict between the
terms of the Option Agreement and the terms of the Option Plan, the terms
of the
Option Plan shall govern and control. Upon the execution of this Agreement,
the
Company shall grant to the Employee options under the Sonterra Resources,
Inc.
2007 Non-Qualified Stock Option Plan to acquire shares of Common Stock having
an
exercise price, vesting and term as described on Exhibit
A
attached
hereto.
(d) Employee
Benefits.
During
the Employment Term, the Employee shall be entitled to participate in all
employee benefit plans (including executive bonus plans, cash bonus awards
and
long-term incentive plans), programs and arrangements that are generally
made
available by the Company to its senior executives. In addition to the rights
of
the Employee set forth in the preceding sentence, the Company shall provide
health, dental, disability and life insurance for the Employee under such
group
health, dental, disability and life insurance plans maintained by the Company
for its full-time, salaried employees (subject to the terms and conditions
thereof). Nothing herein shall require the Company to adopt or maintain any
type
of benefit plan or policy. The Employee acknowledges that any such plan or
policy will be subject to deductibles and co-pay requirements
(e) Expenses.
During
the Employment Term, the Employee shall be entitled to receive reimbursement
upon a timely basis (according to the then-current practices of the Company)
for
all reasonable and necessary out-of-pocket expenses incurred by the Employee
in
connection with performing his duties and responsibilities hereunder, that
are
reimbursable in accordance with the Company’s policies from time to time in
effect, upon the presentation by the Employee of an itemized monthly accounting
of such expenditures, including receipts where required by Company policy
or
federal income tax regulations.
(f) Payment
of Base Salary.
No
Base
Salary shall be paid to the Employee prior to the Acquisition Completion.
Promptly after the Acquisition Completion, but no earlier than three Business
Days, and no later than five Business Days, after the public announcement
of the
Acquisition Completion, the Company shall pay the Employee all Base Salary
accrued through such payment date. Base Salary for the periods after such
payment date shall be payable in installments in accordance with the general
payroll practices of the Company, or as otherwise mutually agreed upon, but
no
less often than twice monthly. As used in this Agreement, “Business Day” means
any day other than Saturday, Sunday or other day on which commercial banks
in
New York City are authorized or required by law to remain closed.
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(g) Definitions.
For
purposes of this Agreement, (i) “Acquisition Completion” means the consummation
of any “Acquisition” (as defined below) or related series
of
Acquisitions for an aggregate cash purchase price of not less than $25,000,000;
(ii) “Acquisition” means the acquisition by the Company of (A) a majority of the
equity interests in, or substantially all of the assets of, a corporation,
partnership, company or other entity engaged in a business competitive with
the
Company, (B) a majority ownership interest in oil or gas real property interests
with respect to real properties of which the Company is the primary operator,
or
(C) any other oil and gas real property interests and related assets, but,
in
the case of (ii)(A), (ii)(B) and (ii)(C), only if the holders of at least
two-thirds (2/3) of the aggregate principal of the RCGI Notes then outstanding
have expressly consented in writing to such Acquisition; and (iii) the “NAV per
share of Common Stock” means, as
of any date, the result of (I) (X) the value of the total assets of the Company
as of such date, including all cash and cash equivalents, interest and dividends
receivable, less (Y) all liabilities of the Company (including indebtedness,
obligations, expenses and dividends payable), divided by (II) the number
of
outstanding shares of Common Stock as of such date, as such assets, liabilities
and outstanding shares are presented in the consolidated financial statements
of
the Company, prepared in accordance with generally accepted accounting
principles, and set forth in a quarterly report on Form 10-Q or annual report
on
Form 10-K.
5. Vacation.
The
Employee shall be entitled to accrue, pro
rata,
fifteen
(15) vacation days for each annual period during the Employment Term. Vacation
days shall be used during the applicable annual period in which they are
accrued. The Employee shall be entitled to carry over up to five (5) accrued
vacation days from one annual period to the next and all the rest of the
accrued
vacation time that the Employee does not use during the applicable annual
period
in which they were accrued shall be forfeited unless the Company shall have
requested the Employee, in writing, to modify or postpone a previously planned
vacation.
6. Termination
of Employment.
(a) For
Cause.
The
Company may terminate the Employee’s employment at any time hereunder for Cause
(as defined below) (a “For Cause Termination”) upon written notice to the
Employee. For purposes of this Agreement, “Cause” shall mean any of the
following:
(i) dishonesty
by the Employee in the performance of his duties and obligations to the
Company;
(ii) the
Employee’s conviction of, or entering a plea of guilty, nolo contendere or
comparable plea to, any felony or to any misdemeanor involving moral
turpitude;
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(iii) any
willful act or omission by the Employee that is, or is likely to be, materially
injurious to the financial condition or business reputation of the Company,
as
determined by the Board of the Company or an independent committee of the
Board
of the Company;
(iv) a
breach
by the Employee of any material covenant contained in this Agreement that
is to
be observed or performed by the Employee;
(v) a
breach
by the Employee of any of the written policies of the Company the result
of
which is, or is likely to be, materially injurious to the Company, as determined
by the Board of the Company or an independent committee of the Board of the
Company;
(vi) any
appropriation by the Employee of a corporate opportunity or a material corporate
asset;
(vii) the
Company being unable to register its securities with the United States
Securities and Exchange Commission or listed on a stock exchange due to the
failure of the Employee to make a disclosure with respect to the Employee’s
background; or
(viii) the
failure or refusal by the Employee to comply with a written lawful directive
by
the Board or any committee of the Board that is not inconsistent with the
terms
hereof.
(b)
Without
Cause.
The
Company may in its sole and absolute discretion terminate Employee’s employment
hereunder at any time without Cause for any or no reason. For purposes of
this
Agreement, a “Without Cause Termination” shall mean a termination by the Company
of Employee’s employment hereunder other than pursuant to a For Cause
Termination.
(c) Death.
The
Employee’s employment hereunder shall terminate automatically upon his
death.
(d) Disability.
If the
Disability (as defined below) of the Employee occurs during the Employment
Term,
the Company may notify the Employee of the Company’s intention to terminate the
Employee’s employment hereunder for Disability. In such event, the Employee’s
employment hereunder shall terminate effective on the 30th day following
the
date such notice of termination is received by the Employee (the “Disability
Effective Date”). For purposes of this Agreement, the “Disability” of the
Employee shall be deemed to have occurred at such time as the Board determines,
in its reasonable discretion, (i) that despite any reasonable accommodation
required by law, the Employee is unable to perform the essential functions
of
his position hereunder as a result of his physical or mental incapacity and
(ii)
that such inability has existed or is likely to exist for a period of ninety
(90) days or more in any twelve (12) month period or for sixty (60) consecutive
days.
(e) Termination
By The Employee.
For
Good Reason.
The
Employee may terminate his employment hereunder if (i) there occurs a material
breach by the Company of any material provision of this Agreement, which
breach
is not cured within thirty (30) days after written notice by the Employee
to the
Company of such breach; or (ii) the Employee’s Base Salary is reduced pursuant
to the terms of Section 4(a) hereof and is not fully restored to the original
amount set forth in Section 4(a) hereof within ninety (90) days from the
date of
such reduction. For purposes of this Agreement, a “Good Reason Termination”
shall mean a termination by the Employee of Employee’s employment hereunder
pursuant to this Section 6(e).
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(f) Notice
of Termination.
Any
termination of the Employee’s employment hereunder by the Company or by the
Employee (other than a termination pursuant to Section 6(c)) shall be
communicated by a Notice of Termination (as defined below) to the other party
hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a
written notice which (i) indicates the specific termination provision in
this
Agreement relied upon, (ii) in the case of a termination for Disability or
a For
Cause Termination or a Good Reason Termination, sets forth in reasonable
detail
the facts and circumstances claimed to provide a basis for termination of
the
Employee’s employment under the provision so indicated, and (iii) specifies the
Employment Termination Date (as defined in Section 6(g) below). The failure
by
the Company or Employee, as applicable, to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of
Disability, Cause or Good Reason shall not waive any right of the Company
or
Employee hereunder or preclude the Company or Employee from asserting such
fact
or circumstance in enforcing the Company’s or Employee’s rights
hereunder.
(g) Employment
Termination Date.
For
purposes of this Agreement, “Employment Termination Date” shall mean the
effective date of termination of the Employee’s employment hereunder, which date
shall be (i) if the Employee’s employment is terminated by his death, the date
of his death, (ii) if the Employee’s employment is terminated because of his
Disability, the Disability Effective Date, (iii) if the Employee’s employment is
terminated by the Company pursuant to a For Cause Termination, the date
specified in the Notice of Termination, (iv) if the Employee’s employment is
terminated by the Company pursuant to a Without Cause Termination, the date
specified in the Notice of Termination and (v) if the Employee’s employment is
terminated by the Employee pursuant to a Good Reason Termination, the date
on
which the Notice of Termination is given.
(h) Resignation.
In the
event of termination of the Employee’s employment hereunder for any reason
whatsoever other than the death of the Employee, the Employee agrees that
if at
such time he is a member of the Board of Directors or officer of the Company
or
a director or officer of any of the Company’s subsidiaries, he shall promptly
deliver to the Company his written resignation from all such positions, such
resignation to be effective as of the Employment Termination Date.
7. Company
Obligations Upon Termination of Employment.
(a) Death.
If the
Employee’s employment hereunder is terminated by reason of the Employee’s death,
the Company shall pay to the Employee’s estate, in a lump sum in cash within
thirty (30) days after the Employment Termination Date, a sum equal to the
Employee’s accrued and unpaid Base Salary (provided that such sum shall be
deemed to be zero dollars ($0) prior to the Acquisition Completion),
reimbursable expenses and vacation accrued but unpaid in each case through
the
Employment Termination Date, and thereafter the Company shall have no further
obligation to the Employee under this Agreement.
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(b) Disability.
If the
Employee’s employment hereunder is terminated by reason of the Employee’s
Disability, the Company shall pay to the Employee, in a lump sum in cash
within
thirty (30) days after the Employment Termination Date, a sum equal to the
Employee’s accrued and unpaid Base Salary (provided that such sum shall be
deemed to be zero dollars ($0) prior to the Acquisition Completion),
reimbursable expenses and vacation accrued but unpaid in each case through
the
Employment Termination Date, and thereafter the Company shall have no further
obligation to the Employee under this Agreement, except as provided in the
immediately following sentence. In addition, the Company shall continue to
provide at its expense group medical and dental insurance, as in effect on
the
Employment Termination Date, to the Employee and to the Employee’s immediate
family for a period of six (6) months after the Employment Termination
Date.
(c) For
Cause Termination.
If the
Employee’s employment hereunder is terminated pursuant to a For Cause
Termination, the Company shall pay to the Employee, in a lump sum in cash
within
thirty (30) days after the Employment Termination Date, the Employee’s accrued
and unpaid Base Salary (provided that such sum shall be deemed to be zero
dollars ($0) prior to the Acquisition Completion), reimbursable expenses
and
vacation accrued but unpaid in each case through the Employment Termination
Date, to the extent not theretofore paid, and, thereafter, the Company shall
have no further obligations to the Employee under this Agreement.
(d) Without
Cause Termination and Good Reason Termination.
If the
Employee’s employment hereunder is terminated by reason of a Without Cause
Termination or a Good Reason Termination pursuant to Section 6(e)(i), the
Company shall pay to the Employee the Employee’s Base Salary for a period equal
to the lesser of six (6) months and the remainder of the then current Employment
Term (provided that such Base Salary shall be paid to the Employee solely
if
such termination occurs after the Acquisition Completion), at the regularly
scheduled payment intervals following the Employment Termination Date, and
shall
pay within thirty (30) days following the Employment Termination Date all
reimbursable expenses and vacation accrued but unpaid in each case through
the
Employment Termination Date and shall continue to provide group medical and
dental insurance at the Company’s expense, as in effect on the Employment
Termination Date, to the Employee and to the Employee’s immediate family for the
six-month period after the Employment Termination Date and thereafter the
Company shall have no further obligation to the Employee under this Agreement.
If the Employee’s employment hereunder is terminated by reason of a Good Reason
Termination pursuant to Section 6(e)(ii) hereof, the Company shall pay to
the
Employee, in a lump sum in cash within thirty (30) days after the Employment
Termination Date, the Employee’s accrued and unpaid Base Salary (provided that
such sum shall be deemed to be zero dollars ($0) prior to the Acquisition
Completion), reimbursable expenses and vacation accrued but unpaid in each
case
through the Employment Termination Date, to the extent not theretofore paid,
and, thereafter, the Company shall have no further obligations to the Employee
under this Agreement; provided
that the
Employee shall not be subject to Section 11 hereof after his termination
pursuant to Section 6(e)(ii).
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(e) Sole
Remedy.
The
receipt of payments, if any, provided for under Section 7(d) shall be the
Employee’s sole and exclusive remedy for the termination of his employment
hereunder and shall be in lieu of any claim that he might otherwise have
against
the Company arising from such termination. All payments that are to be made
by,
and/or benefits that are to be provided, the Company to the Employee following
the Employment Termination Date shall be subject to the Employee complying
with
any covenants hereunder to be observed or performed by the Employee following
termination of the Employee’s employment hereunder including, without
limitation, Sections 9, 10, 11, and 12 hereof.
(f) Release.
Any
severance payments due to Employee under Section 7(d) shall be contingent
upon
Employee’s execution of a full and general release of any and all claims against
the Company, the Board of Directors and officers of the Company and any
affiliates and representatives of the Company arising out of Employee’s
employment with the Company or this Agreement, in a form acceptable to the
Company.
(g) No
Duty to Mitigate.
Employee’s rights and privileges under the first sentence of Section 7(d) shall
be considered severance pay in consideration of his past service to the Company,
and his entitlement thereto shall neither be governed by any duty to mitigate
his damages by seeking further employment nor offset by any compensation
that he
may receive from future employment unless such employment is a violation
of
Section 11 hereof.
8. Employee’s
Compliance With Company Policies And The Law.
The
Employee shall comply fully with all Company policies, procedures and rules,
as
determined, promulgated and modified by the Company from time to time,
including, without limitation, the Company’s policies, procedures and rules
prohibiting discrimination and harassment, and concerning email and Internet
use, and the Company’s Xxxxxxx Xxxxxxx Policy and Procedures. The Company
reserves the right to add, delete or modify any Company policy, procedure
or
rule in its respective sole discretion. The Employee shall also comply fully
with all applicable U.S. federal, state and local laws, regulations and
ordinances, including, without limitation the Xxxxxxxx-Xxxxx Act of
2002.
9. Nondisclosure
of Confidential and Proprietary Information
During
the Employment Term, the Employee agrees to the following:
8
(a) The
Employee acknowledges that during the Employment Term, the Employee will
have
access to and possession of trade secrets, confidential information, and
proprietary information (collectively, as defined more extensively below,
“Confidential Information”) of the Company, its parents, subsidiaries and
affiliates and their respective customers, suppliers and other third parties
that do business with them. The Employee recognizes and acknowledges that
this
Confidential Information is valuable, special and unique to the Company’s
business, is owned solely by and is the exclusive property of the Company,
is to
be used only for the Company’s benefit, and that access to and knowledge thereof
are essential to the performance of the Employee’s duties to the Company. During
the Employment Term and, thereafter, the Employee shall keep secret and shall
not use or disclose, reveal, transfer, reproduce, sell, capitalize upon or
take
advantage of such Confidential Information relating to the Company, its
customers, suppliers or other third parties that do business with it except
at
the request of the Company, and in addition, Employee shall exercise all
reasonable efforts and precautions to prevent such disclosure, breach of
confidentiality, or other conduct or action inconsistent herewith; provided,
however,
that
Confidential Information may be disclosed to the extent (i) required by law
or
court order or (ii) generally available to the public other than by unauthorized
disclosure.
(b) The
term
“Confidential Information” means information in whatever form, be it written,
digital, graphic, electronically stored, orally transmitted or memorized,
concerning:
(i) the
Company’s business or operations plans, strategies, portfolio, prospects or
objectives;
(ii) the
Company’s structure, products, product development, technology, distribution,
sales, services, support and marketing plans, practices, and
operations;
(iii) the
prices, costs, and details of the Company’s services;
(iv) research
and development, new products, licenses, operations or plans;
(v) trade
secrets, proprietary information, trade and service marks, inventions, mask
works, ideas, processes, formulas, source and object codes, data, programs,
other works of authorship, know-how, discoveries, developments, designs,
schematics, manuals, drawings, computer disks and programs, techniques, employee
suggestions, development tools, computer printouts and improvements (hereinafter
referred to as “Inventions”);
(vi) customers
and customer lists, including present and potential customers, prospects
or
targets (including without limitation, the identities of customers, names,
addresses, contact, persons and the customers’ business status or needs),
customer files and records;
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(vii) information
regarding the skills, compensation and benefits of other employees of the
Company;
(viii) financial
records, unpublished financial statements, financial condition, results of
the
Company’s operations and related information about the Company;
(ix) any
other
financial, commercial, business or technical information related to any of
the
products or services made, developed or sold by the Company or its
customers.
(c) The
Employee further recognizes that the Company has received, and in the future
will receive, from third parties confidential or proprietary information
(“Third Party
Information”) subject to a duty on the Company’s part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. During the Employment Term and thereafter, the Employee shall hold
all
Third Party Information in the strictest confidence and shall not disclose
to
anyone (other than Company personnel who need to know such information in
connection with their work for the Company) or use, except in connection
with
work for the Company, any Third Party Information unless expressly authorized
by
the Company in writing.
(d) The
Employee further agrees to store and maintain all Confidential Information
and
Third Party Information in a secure place. On the termination of employment,
Employee agrees to deliver all records, data, information, and other documents
produced or acquired during the Employment Term, and all copies thereof,
to the
Company. Such material at all times shall remain the exclusive property of
the
Company, unless otherwise agreed to in writing by the Company. Upon termination
of the employment, the Employee agrees to make no further use of any
Confidential Information on his own behalf or on behalf of any other person
or
entity other than the Company.
(e)
During
the Employment Term and thereafter, the Employee shall not improperly use
or
disclose any confidential information or trade secrets, if any, of any former
employer or any other person to whom the Employee has an obligation of
confidentiality, and shall not bring onto the premises of the Company any
unpublished documents or any property belonging to any former employer or
any
other person to whom the Employee has an obligation of confidentiality unless
consented to in writing by that former employer or person.
10.
Assignment
of Inventions and Intellectual Property
(a) The
term
“Proprietary Rights” shall mean all trade secret, trademark, service xxxx,
patent, copyright, mask work and other intellectual property rights throughout
the world. The term “Inventions” shall mean all trade secrets, trade and service
marks, inventions, mask works, ideas, processes, formulas, source and object
codes, data, programs, technology, writings, software programs, other works
of
authorship, know how, discoveries, developments, designs, techniques or any
claim of rights (or any related improvements or modifications to the
foregoing).
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(b) In
consideration of the Employee’s employment, the Employee hereby assigns and
agrees to assign in the future (when any such Inventions or Proprietary Rights
are first reduced to practice or first fixed in an tangible medium, as
applicable) to the Company all right, title and interest in and to any and
all
Inventions (and all Proprietary Rights with respect thereto) whether or not
patentable or registrable under copyright or similar statutes, made or conceived
or reduced to practice or learned by the Employee, either alone or jointly
with
others, during or at any time before or after the period of employment with
the
Company, which (i) relate to methods, apparatus, designs, products, processes
or
devices sold, leased, used or under construction or development by the Company
or any subsidiary or otherwise relate to or pertain to the actual or anticipated
business, functions, operations, research or development of the Company or
any
subsidiary, (ii) arise (wholly or partly) from the Employee’s efforts during any
time that the Employee is either physically present on the Company’s premises or
utilizing any physical or intellectual property owned or leased by the Company,
or (iii) are based on any information or knowledge gained by the Employee
through his employment with the Company. Inventions assigned to the Company,
or
to a third party as directed by the Company pursuant to this Section, are
hereinafter referred to as “Company Inventions.”
(c) During
the Employment Term and for eighteen (18) months thereafter, the Employee
shall
promptly disclose to the Company, fully and in writing, all Inventions authored,
conceived or reduced to practice by the Employee, either alone or jointly
with
others. In addition, the Employee shall promptly disclose to the Company
all
patent applications filed by the Employee or on behalf of the Employee within
eighteen (18) months after termination of employment. At the time of each
such
disclosure, the Employee shall advise the Company in writing of any Inventions
that he believes fully qualifies for protection under the Law; and the Employee
shall at that time provide to the Company in writing all evidence necessary
to
substantiate that belief.
(d) The
Employee also agrees to assign all right, title and interest in and to any
particular Company Invention to a third party, as directed by the
Company.
(e) The
Employee shall assist the Company in every proper way to obtain, and from
time
to time to enforce, the Company’s Proprietary Rights relating to Company
Inventions in any and all countries. To that end the Employee shall execute,
verify and deliver such documents and perform such other acts (including
appearances as a witness) as the Company may reasonably request for use in
applying for, obtaining, perfecting, evidencing, sustaining and enforcing
such
Proprietary Rights and the assignment thereof. In addition, the Employee
shall
execute, verify and deliver assignments of such Proprietary Rights to the
Company or its designee. The Employee’s obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any
and all
countries shall continue beyond the termination of employment, and the Company
shall provide compensation at a reasonable rate after termination for the
time
actually spent by the Employee at the Company’s request on any such
assistance.
11
(f) In
the
event the Company is unable for any reason, after reasonable effort, to secure
the Employee’s signature on any document needed in connection with the actions
specified in the preceding paragraph, the Employee hereby irrevocably appoints
the Company and its duly authorized officers and agents as the Employee’s agent
and attorney in fact to act for and in his behalf to sign, execute, verify
and
file any and all documents and to do all other lawfully permitted acts to
further the purposes of the preceding paragraph with the same legal force
and
effect as if executed by the Employee. The Employee hereby waives and quitclaims
to the Company any and all claims, of any nature whatsoever, which the Employee
now or may hereafter have for infringement of any Proprietary Rights assigned
to
the Company.
(g) Notwithstanding
the foregoing, the Employee shall not be prohibited by this Section 10 from
using, after the Employment Term, ideas, data, technology, know how or
techniques that are acquired or generated from the general knowledge of the
industry that the Company is engaged in.
11. Non-Competition.
(a) Employee
will, as a result of his employment with the Company, be involved with and
exposed to substantial business resources and assets of the Company and certain
of its affiliates and will develop additional contacts and relationships
with
numerous individuals and companies, which are also involved in the business
of
the Company or businesses related thereto. Such individuals and organizations
will have business and contractual relationships with the Company and/or
its
affiliates that will be a valuable asset thereof. The Employee also recognizes
and agrees with the Company that the services which the Employee will render
during the Employment Term are unique, special and of extraordinary character,
that the Company will be substantially dependent upon such services to develop
and market its products and to earn a profit, and that the application of
the
Employee’s knowledge and services to any competitive business would be
substantially detrimental to the Company. Accordingly, in consideration for
employment by the Company and compensation and other benefits, including
any
compensation the Employee may receive after his employment is terminated
pursuant to this Agreement, the Employee shall not, directly or indirectly
(whether as an employee, officer, executive, director, manager, stockholder,
member, lender, consultant or any other capacity), during the period of his
employment with the Company, and for a period of six (6) months after
termination of employment hereunder for any reason whatsoever, engage in
any
business or activity or otherwise compete anywhere in the United States,
with
any business or activity that is competitive with any business or activity
engaged in by the Company or any of its subsidiaries or affiliates or
contemplated to be engaged in (as of the time of the termination of employment)
by the Company or any such subsidiary or affiliate; provided, however,
that
the
foregoing sentence shall not be applicable in the event the Employee is
terminated pursuant to Section 6(e)(ii) hereof or if the Employee or the
Company
terminates this Agreement at the end of the Initial Term or any additional
term
pursuant to Section 1. In addition, for a period of two (2) years from the
end
of the Employment Term the Employee shall not induce or attempt to induce
any
person or entity that is engaged in any business activity or relationship
with
the Company or any subsidiary or affiliate of the Company to terminate that
activity or relationship to reduce such activity or relationship.
12
(b) The
term
“compete” as used herein means to engage, directly or indirectly, either as a
proprietor, partner, employee, commissioned salesperson, agent, consultant,
director, officer, stockholder or in any other capacity or manner whatsoever.
The provisions of this Section shall not prevent the Employee from investing
any
assets in securities of any publicly-traded corporation, provided that such
investments do not, directly or indirectly, result in the Employee, his spouse
or his children collectively (i) owning beneficially at any time five percent
(5%) or more of the equity securities of any corporation engaged in a business
competitive with the Company, or (ii) otherwise being able to control or
actively participate in the business decisions of such corporation.
12. Non-Solicitation.
For
the
period of his employment by the Company and for two (2) years after
the
date of the conclusion of such employment, the Employee shall not (i) induce,
solicit or seek to influence, either directly or indirectly, any employee
of, or
any person under written contract with, the Company or any of its affiliates,
to
leave the employ of the Company or any subsidiary, or division thereof or
to
enter into any employment agreement, independent contractor arrangement,
or any
other arrangement whereby such individual would perform services for
compensation, either directly or indirectly, for any person, firm, corporation
or other entity engaged in business in competition with the Company or any
of
its affiliates, or (ii) solicit any customer of the Company or any of its
affiliates, or any identified prospect or identified potential customer to
which
a marketing proposal or presentation was made during the twelve-month period
immediately preceding termination of the Employment Term (other than on behalf
of the Company) for any business of the type conducted by the
Company.
13. No
Conflicting Obligations.
The
Employee represents and warrants that the Employee has the full right and
authority to enter into this Agreement and to render the services as required
under this Agreement, and that the execution, delivery, and performance by
the
Employee of this Agreement do not and will not conflict with or result in
a
violation of any provision of, or constitute a default under, any contract,
agreement, instrument, or obligation to which the Employee is a party or
by
which the Employee is bound, including any agreement to keep in confidence
information acquired by the Employee in confidence or in trust prior to
employment by the Company. The Employee shall not enter into any agreement
or
business relationship or incur any obligations to any third party following
the
date hereof that may conflict with, or interfere with the Employee’s abilities
to perform, the Employees duties and responsibilities pursuant to this
Agreement.
13
14. Return
of Company Property.
When
the
Employee leaves the employ of the Company, the Employee shall deliver to
the
Company (and shall not keep in his possession, recreate or deliver to anyone
else) any and all devices, records, recordings, data, notes, reports, proposals,
lists, correspondence, specifications, drawings, blueprints, sketches,
materials, computer materials, equipment, other documents or property, together
with all copies thereof (in whatever medium recorded), belonging to the Company,
its successors or assigns. The Employee further agrees that any property
situated on the Company’s premises and owned by the Company, including computer
disks and other digital, analog or hard copy storage media, filing cabinets
or
other work areas, is subject to inspection by Company personnel at any time
with
or without notice. Prior to leaving, the Employee shall cooperate with the
Company in completing and signing the Company’s termination statement for
management personnel.
15. Notification
of New Employer.
In
the
event that the Employee leaves the employ of the Company, the Employee hereby
agrees to notify his new employer of those of the Employee’s obligations which
are continuing under this Agreement after the termination hereof.
16. Remedies.
(a) The
Company shall be entitled to equitable relief, including injunctive relief
and
specific performance as against the Employee and his agents, without the
requirement of posting bond or other security or proof of damage, for the
Employee’s or his agent’s threatened or actual breach of Section 8, 9, 10, 11 or
12 of this Agreement, as money damages for a breach thereof would be incapable
of precise estimation, uncertain, and an insufficient remedy for an actual
or
threatened breach of Section 8, 9, 10, 11 or 12 of this Agreement. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies available for such breach or threatened breach of Section 8, 9,
10, 11,
or 12 of this Agreement, including the recovery of damages.
(b)
The
prevailing party in any legal actions arising under this Agreement shall
be
reimbursed in full the legal fees for enforcement in favor of such prevailing
party.
17. Public
Statements.
Employee
agrees that he shall not make any speeches, publish articles, appear as a
guest
or a commentator on any television or radio show or issue statements to the
press, or that in anyway pertain to, the Company or to Employee’s employment
with same without the Company’s prior approval unless pursuant to the Employee’s
duties to the Company. Violation of this provision by Employee is a material
breach of this Agreement.
14
18. Notices.
Any
notices, requests, demands or other communications required or permitted
under
this Agreement shall be in writing and shall be deemed to have been given
when
delivered personally or three (3) days after being mailed by certified mail,
return receipt requested, addressed to the party being notified at the address
of such party first set forth herein, or at such other address as such party
may
hereafter have designated by notice; provided,
however,
that
any notice of change of address shall not be effective until its receipt
by the
party to be charged therewith.
19. Miscellaneous.
(a) Telephones,
stationery, postage, e-mail, the internet and other resources made available
to
the Employee by the Company are solely for the furtherance of the Company
business.
(b) All
construction and interpretation of this Agreement shall be governed by and
construed in accord with the internal laws of the State of Texas, without
giving
effect to that State’s principles of conflicts of law.
(c) The
Employee and the Company agree that any provision of this Agreement deemed
unenforceable or invalid by any court of competent jurisdiction shall be
reformed and modified to make such provision valid and to permit enforcement
of
the objectionable provision to the fullest permissible extent. It is the
intent
of the Company and the Employee that this Agreement be enforced to the fullest
extent permitted by applicable law. Any provision of this Agreement deemed
unenforceable after modification shall be deemed stricken from this Agreement,
with the remainder of this Agreement being given its full force and effect.
If
any term or other provision of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced
by
any rule of law or public policy, all other terms, provisions and conditions
of
this Agreement shall nevertheless remain in full force and effect.
(d) Any
waiver granted by a party of any breach of or failure to comply with any
provision or condition of this Agreement by the other party shall not be
construed as, or constitute, a continuing waiver of such provision or condition,
or a waiver of any other breach of, or failure to comply with, any other
provision or condition of this Agreement, any such waiver to be limited to
the
specific matter and instance for which it is given. No waiver of any such
breach
or failure or of any provision or condition of this Agreement shall be effective
unless in a written instrument signed by the party granting the
waiver.
15
(e) The
Employee and the Company independently have made all inquiries regarding
the
qualifications and business affairs of the other which either party deems
necessary. The Employee affirms that the Employee is knowledgeable and
sophisticated as to business matters, including the subject matter of this
Agreement, and has read and fully understands this Agreement’s meaning and
legally binding effect. The Employee further affirms that, prior to assenting
to
the terms of this Agreement, the Employee had been provided with a reasonable
time to review it, consult with counsel of the Employee’s own choice, and to
negotiate at arm’s length with the Company as to the contents of this Agreement.
The Employee further affirms that the provisions in this Agreement represent
accurately the expression of the parties’ mutual intent, and that the Employee
has entered into this Agreement freely and voluntarily and without pressure
or
coercion from anyone. Each party assumes the risk of any misrepresentation
or
mistaken understanding or belief relied upon by either party in entering
into
this Agreement. In resolving any dispute or construing any term or provision
in
this Agreement, there shall be no presumption made or inference drawn because
of
the inclusion of a provision not contained in a prior draft or the deletion
of a
provision contained in a prior draft. The parties acknowledge and agree that
this Agreement was negotiated and drafted with each party being represented
by
competent counsel of its choice and with each party having an opportunity
to
participate in the drafting of the provisions hereof and shall therefore
be
construed as if drafted jointly by the parties.
(f) The
Company and the Employee agree that the Employee’s obligations to the Company
during the Employee’s employment with the Company, as well as any other
obligations of the Employee under this Agreement, may be assigned to any
successor in interest to the Company or to any division or affiliate of the
Company in its sole discretion and without additional consideration or prior
notice to the Employee, but that nothing requires the Company to do so. The
Employee’s obligations under this Agreement are personal in nature and may not
be assigned by the Employee to any other person or entity.
(g) This
Agreement contains the entire understanding and agreement of the parties
relating to the subject matter hereof and supersedes all prior and/or
contemporaneous understandings and agreements of any kind and nature (whether
written or oral) among the parties with respect to such subject matter, all
of
which are merged herein. This Agreement may not be modified, amended, altered
or
supplemented, except by a written agreement executed by each of the parties
hereto.
(h) This
Agreement and any amendments hereto may be executed and delivered in one
or more
counterparts, and by the different parties hereto in separate counterparts,
each
of which when executed shall be deemed to be an original, but all of which
taken
together shall constitute one and the same agreement, and shall become effective
when counterparts have been signed by each party hereto and delivered to
the
other parties hereto, it being understood that all parties need not sign
the
same counterpart. In the event that any signature to this Agreement or any
amendment hereto is delivered by facsimile transmission or by e-mail delivery
of
a “.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof. At the request of any party, each
other
party shall promptly re-execute an original form of this Agreement or any
amendment hereto and deliver the same to the other party. No party hereto
shall
raise the use of a facsimile machine or e-mail delivery of a “.pdf” format data
file to deliver a signature to this Agreement or any amendment hereto or
the
fact that such signature was transmitted or communicated through the use
of a
facsimile machine or e-mail delivery of a “.pdf” format data file as a defense
to the formation or enforceability of a contract, and each party hereto forever
waives any such defense.
(i) The
headings of this Agreement are for convenience of reference and shall not
form
part of, or affect the interpretation of, this Agreement.
[Signature
page follows]
16
IN
WITNESS WHEREOF,
the
parties have executed and delivered this Agreement on the date first above
written.
By:
|
/s/
Xxxxxxx X. Xxxxxxx
|
|
Name:
|
Xxxxxxx
X. Xxxxxxx
|
|
Title:
|
President
|
|
EMPLOYEE:
|
||
/s/
Xxxxxx X. Xxxxxxxxxx
|
||
Xxxxxx
X. Xxxxxxxxxx
|
Consent
and Waiver
The
undersigned hereby consents to the Company’s execution, delivery and performance
of this Employment Agreement and the issuance of Options, and the issuance
of
shares of Common Stock pursuant to the exercise of such Options, contemplated
thereby and waives any restrictions thereon contained in that certain Securities
Exchange and Additional Note Purchase Agreement, dated as of August 3, 2007,
between the undersigned and Sonterra Resources, Inc. (as amended by that
certain
February 2008 Amendment Agreement, dated as of February 14, 2008, and as
may be
further amended, restated, supplemented or otherwise modified and in effect
from
time to time) or any other agreement between the undersigned and Sonterra
Resources, Inc.
THE
LONGVIEW FUND, L.P., a California limited partnership
|
||
By:
|
Viking
Asset Management, LLC
|
|
Its:
|
Investment
Adviser
|
|
By:
|
/s/
S. Xxxxxxx Xxxxxxx
|
|
Name:
|
S.
Xxxxxxx Xxxxxxx
|
|
Title:
|
CFO
& Managing Member
|
[Signature
Page to Employment Agreement - Xxxxxx X. Xxxxxxxxxx]
17
Exhibit
A
Option
Grant
Employee
Options granted pursuant to the Sonterra Resources, Inc. 2007 Non-Qualified
Stock Option Plan, which Options may be exercised upon or after becoming
vested:
Grant
Date: June
23, 2008
Group
#1
Number
of
shares of Common Stock underlying Options Granted: 439,122
Exercise
Price: $1.35.
Vesting
Schedule:
·
|
Such
Options shall vest with respect to 146,374
shares of Common Stock subject thereto on the earlier of (A) the
first
anniversary of the Acquisition Completion (the “First Anniversary”) and
(B) the first date following the Acquisition Completion on which
the
Company files a quarterly report on Form 10-Q or an annual report
on Form
10-K for a period at the end of which the Company has an “NAV per share of
Common Stock” that is at least $4.00 (as adjusted to reflect any stock
split, stock dividend, stock combination or similar transaction
after the
date hereof, as set forth in the Option Agreement).
|
·
|
Such
Options shall vest with respect to 146,374
shares of Common Stock on the earlier of (A) the second anniversary
of the
Acquisition Completion (the “Second Anniversary”) and (B) the first date
following the First Anniversary on which the Company files a quarterly
report on Form 10-Q or an annual report on Form 10-K for a period
at the
end of which the Company has an “NAV per share of Common Stock” that is at
least $6.00 (as adjusted to reflect any stock split, stock dividend,
stock
combination or similar transaction after the date hereof, as set
forth in
the Option Agreement).
|
·
|
Such
Options shall vest with respect to 146,374
shares of Common Stock on the earlier of (A) the third anniversary
of the
Acquisition Completion (the “Third Anniversary”) and (B) the first date
following the Second Anniversary on which the Company files a quarterly
report on Form 10-Q or an annual report on Form 10-K for a period
at the
end of which the Company has an “NAV per share of Common Stock” that is at
least $8.00 per share (as adjusted to reflect any stock split,
stock
dividend, stock combination or similar transaction after the date
hereof,
as set forth in the Option Agreement) .
|
18
Group #2
Number
of
shares of Common Stock underlying Options Granted: 439,123
Exercise
Price: $1.755.
Vesting
Schedule:
·
|
Such
Options shall vest with respect to 146,374
shares of Common Stock subject thereto on the earlier of (A) the
First
Anniversary and (B) the first date following the Acquisition Completion
on
which the Company files a quarterly report on Form 10-Q or an annual
report on Form 10-K for a period at the end of which the Company
has an
“NAV per share of Common Stock” that is at least $4.00 (as adjusted to
reflect any stock split, stock dividend, stock combination or similar
transaction after the date hereof, as set forth in the Option Agreement).
|
·
|
Such
Options shall vest with respect to 146,374
shares of Common Stock on the earlier of (A) the Second Anniversary
and
(B) the first date following the First Anniversary on which the
Company
files a quarterly report on Form 10-Q or an annual report on Form
10-K for
a period at the end of which the Company has an “NAV per share of Common
Stock” that is at least $6.00 (as adjusted to reflect any stock split,
stock dividend, stock combination or similar transaction after
the date
hereof, as set forth in the Option Agreement).
|
·
|
Such
Options shall vest with respect to 146,375
shares of Common Stock on the earlier of (A) the Third Anniversary
and (B)
the first date following the Second Anniversary on which the Company
files
a quarterly report on Form 10-Q or an annual report on Form 10-K
for a
period at the end of which the Company has an “NAV per share of Common
Stock” that is at least $8.00 (as adjusted to reflect any stock split,
stock dividend, stock combination or similar transaction after
the date
hereof, as set forth in the Option Agreement).
|
Group
#3
Number
of
shares of Common Stock underlying Options Granted: 439,123
Exercise
Price: $2.025.
Vesting
Schedule:
·
|
Such
Options shall vest with respect to 146,374
shares of Common Stock subject thereto on the earlier of (A) the
First
Anniversary and (B) the first date following the Acquisition Completion
on
which the Company files a quarterly report on Form 10-Q or an annual
report on Form 10-K for a period at the end of which the Company
has an
“NAV per share of Common Stock” that is at least $4.00 (as adjusted to
reflect any stock split, stock dividend, stock combination or similar
transaction after the date hereof, as set forth in the Option Agreement).
|
·
|
Such
Options shall vest with respect to 146,374
shares of Common Stock on the earlier of (A) the Second Anniversary
and
(B) the first date following the First Anniversary on which the
Company
files a quarterly report on Form 10-Q or an annual report on Form
10-K for
a period at the end of which the Company has an “NAV per share of Common
Stock” that is at least $6.00 (as adjusted to reflect any stock split,
stock dividend, stock combination or similar transaction after
the date
hereof, as set forth in the Option Agreement).
|
·
|
Such
Options shall vest with respect to 146,375
shares of Common Stock on the earlier of (A) the Third Anniversary
and (B)
the first date following the Second Anniversary on which the Company
files
a quarterly report on Form 10-Q or an annual report on Form 10-K
for a
period at the end of which the Company has an “NAV per share of Common
Stock” that is at least $8.00 (as adjusted to reflect any stock split,
stock dividend, stock combination or similar transaction after
the date
hereof, as set forth in the Option Agreement).
|
19