EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as
of the 1st day of January, 2003 (the "Effective Date"), by and between Magnum
Hunter Resources, Inc., a Nevada corporation ("Magnum Hunter") and its
affiliates, Gruy Petroleum Management Co., a Texas Corporation and a
wholly-owned subsidiary of Magnum Hunter, (collectively, the "Employer") and
Xxxxxxx X. Xxxxx ("Employee").
WHEREAS, the Board of Directors of the Employer (the "Board")
recognizes that it is important to attract, hire and retain key officers and
management personnel;
WHEREAS, the Board also recognizes that, in the event of a Change in
Control (as hereinafter defined), significant distractions of its key management
and operations personnel can result because of the uncertainties inherent in
such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Employer and its stockholders to retain officers and key
employees in the event of a threat or occurrence of Change in Control and to
ensure their continued dedication and efforts in such event without undue
concern for their personal, financial and employment security; and
WHEREAS, in order to induce qualified candidates to accept employment
with the Employer and to remain in the employ of the Employer in the event of a
threat or the occurrence of a Change in Control, the Employer desires to enter
into this Agreement with the Employee.
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Employment. Employer hereby employs Employee and Employee hereby
accepts employment with Employer upon the terms and conditions
hereinafter set forth.
2. Duties. Employee shall serve Employer as Sr. Vice President
Exploration of the Employer with such responsibilities as shall be
determined from time to time by the President of the Employer and the
Board; provided, however, that all duties assigned to Employee
hereunder shall be commensurate with the skill and experience of
Employee. Employee agrees to devote all of his professional time,
attention, skills, benefits and best efforts to the performance of his
duties hereunder and to the promotion of the business and interests of
Employer.
3. Term. This Agreement shall become effective on the Effective
Date, and shall continue, unless earlier terminated in accordance with
the terms of this Agreement, for a period of three (3) years commencing
on the Effective Date. This Agreement shall thereafter be automatically
renewed for a period of six (6) months, unless earlier terminated as
provided herein, and unless one party has given written notice to the
other party of its or his intention not to renew this Agreement at
least thirty (30) days prior to the expiration of its then current term
(the "Term").
4. Compensation. As compensation for his services rendered under
this Agreement, Employee shall be entitled to receive the following:
(a) Base Salary. During the Term, Employee shall initially be
paid an annual salary of One Hundred Eighty Five Thousand and
No/100 Dollars ($185,000.00) per annum (the "Base Salary")
payable in equal payments twice a month for a total of
twenty-four (24) payments per year. The Base Salary may be
increased or decreased as the Board may determine from time to
time. The Base Salary may be increased or decreased as the Board
may determine from time to time. The Base Salary may be increased
or decreased as the Board may determine from time to time,
however in no event will the Base Salary be less than One Hundred
Eighty Five Thousand and No/100 Dollars ($185,000.00);
(b) Expenses. Employer shall reimburse Employee for all
reasonable and necessary out-of-pocket travel and other expenses
incurred by Employee in rendering services required under the
terms of this Agreement, promptly after submission, on a monthly
basis, of a detailed statement of such expenses and reasonable
documentation.
(c) Bonus. Expressly conditioned on the Employee being
employed on the last day of the fiscal year of the Employer, the
Employee may receive a bonus in an amount determined solely by
the unanimous approval of the compensation committee of the
Employer and the Board, in their sole discretion.
(d) Benefits. During the Term, Employee shall be entitled to
receive such group benefits as Employer may provide to its other
employees at comparable salaries and responsibilities to those of
Employee.
(e) Automobile. During the Term, Employee may be entitled to
an automobile allowance to be determined by the Chief Executive
Officer of Employer, in his sole discretion.
Except as provided in Section 7, the compensation set forth in this
Section 4 will be the sole compensation payable to Employee and no
additional compensation or fee will be payable by Employer to Employee
by reason of any benefit gained by the Employer directly or indirectly
through Employee's efforts on Employer's behalf, nor shall Employer be
liable in any way for any additional compensation or fee unless
Employer shall have expressly agreed thereto in writing.
5. Confidentiality; Covenants Not-To-Compete.
(a) Acknowledgment of Proprietary Interest. Employee
acknowledges and agrees that he has had access to proprietary
information and also recognizes the sole proprietary interest of
Employer in any Trade Secrets (as hereinafter defined) of
Employer. Employee further acknowledges and agrees that any and
all Trade Secrets of Employer, learned by Employee during the
course of his employment by Employer or otherwise, whether
developed by Employee alone or in conjunction with others or
otherwise, is and shall be the property of Employer. Employee
further acknowledges and understands that his disclosure of any
Trade Secrets of Employer will result in
2
irreparable injury and damage to Employer. As used herein, "Trade
Secrets" means all non-public confidential and proprietary
information of Employer whether embodied in writing, a computer
disk, video or magnetic tape, CD-Rom or in other form, relating
to the business, operations or affairs of Employer and, any other
confidential information that Employee may then possess or have
under Employee's control, including, without limitation,
information derived from reports, investigations, experiments,
research, work in progress, drawings, designs, plans, proposals,
codes, marketing and sales programs, client lists, mailing lists,
financial projections, any information regarding Employer's oil
and gas properties, maps, plats, surveys, geophysical and
geological data, cost summaries, pricing formula, reports,
studies, well logs, production data, land and title records,
leases and all other materials, or information prepared,
compiled, evaluated, interpreted or performed, for or by
Employer. "Trade Secrets" also includes confidential information
related to the business, products or sales of Employer or
Employer's customers or other business relationships.
(b) Covenants Not-To-Divulge Trade Secrets. Employee
acknowledges and agrees that Employer is entitled to prevent the
disclosure of Trade Secrets of Employer. As a portion of the
consideration for the employment of Employee and for the
compensation being paid to Employee by Employer, Employee agrees
at all times during the term of this Agreement and for three (3)
years thereafter to hold in strictest confidence and not to
disclose or allow to be disclosed to any person, firm, or
corporation, other than to persons engaged by Employer to further
the business of Employer, Trade Secrets of Employer, without the
prior written consent of Employer, including Trade Secrets
developed by Employee. Notwithstanding the foregoing, Employee
shall not be obligated to keep secret and not to disclose or
allow to be disclosed knowledge or information (a) which has
become generally known to the public through no wrongful act of
Employee; (b) which has been rightfully received by Employee from
a third party which to Employee's knowledge was received without
restriction on disclosure and not in violation of any
confidentiality obligation of said third party; (c) which has
been approved for release without restriction as to use or
disclosure by written authorization of Employer; or (d) which has
been disclosed pursuant to a requirement of a governmental agency
or of law without similar restrictions or other protections
against public disclosure, or which disclosure is required by
operation of law. Without limiting the generality of the
foregoing, Employee agrees to affirmatively take such precautions
as Employer may reasonably request or Employee reasonably
believes are appropriate to prevent the disclosure, copying or
use of any of the computer software programs, data bases or other
such information now existing or hereafter developed to any
person or for any purpose not specifically authorized by
Employer.
(c) Abide by Third Party Confidentiality Agreements. Employee
acknowledges that Employer enters into confidentiality agreements
with third parties. Without limiting the generality of the
foregoing, Employee agrees to abide by the terms and conditions
of such confidentiality agreements during the term of this
Agreement for a period
3
beginning on the Effective Date and ending three (3) years
following the Employee's termination of employment with the
Employer for any reason.
(d) Return of Materials at Termination. In the event of any
termination of this Agreement for any reason whatsoever, Employee
will promptly deliver to Employer all documents, data and other
information pertaining to Trade Secrets. Employee shall not take
any documents or other information, or any reproduction or
excerpt thereof, containing or pertaining to any Trade Secrets.
(e) Competition During the Term of this Agreement. From the
period beginning on the Effective Date and ending one (1) year
following the Employee's voluntary termination of employment with
the Employer:
(i) Employee shall not, directly or indirectly, either
for himself or any other person, engage or invest in, own,
manage, operate, finance, control or participate in the
ownership, management, operation, financing or control of, or be
employed by, associated with, or in any manner connected with,
lend Employee's credit to, or render services or advice to, any
business whose products or activities compete in whole or in part
with the oil and gas exploration and production activities of the
Employer in prospects known to be active in the southwestern and
southeastern portions of the United States and the Gulf of Mexico
(including any offshore activities as reflected on Exhibit I
hereto) and any other business which Employer is involved in or
pursuing in the regions in which Employer is conducting such
activities at the time of Employee's termination; provided,
however, that (aa) this Section 5(e) shall not prohibit Employee
from purchasing or holding an equity interest of any class of
securities of any enterprise (but without otherwise participating
in the activities of such enterprise) whether or not such
securities are listed on any national or regional securities
exchanges or have been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and (bb) this Section 5(e) shall not prohibit Employee from
engaging in any such activities unless such Employee is using
Employer's Trade Secrets in connection therewith.
(ii) Employee shall not, directly or indirectly, either
for himself or any other person (A) solicit, induce, recruit, or
attempt to solicit, induce or recruit any employee of the
Employer or to leave the employ of the Employer, (B) in any way
interfere with the relationship between the Employer and any
employee thereof, (C) employ, or otherwise engage as an employee,
independent contractor or otherwise, any employee of the Employer
or (D) induce or attempt to induce any customer, representative,
supplier, licensee or business relation of the Employer to cease
doing business with the Employer, or in any way interfere with
the relationship between any customer, representative, supplier,
licensee or business relation of the Employer.
(f) Tolling of Statute of Limitations. In the event of a
breach by Employee of any covenant set forth in Section 5 above,
the term of such covenants shall be extended by the period of the
duration of such breach.
4
(g) Reasonableness of Terms. The time, scope, geographic area
and other provisions hereof are reasonable and are necessary
under the circumstances to protect the Employer and to enable the
Employer to receive the benefit of this bargain under this
Agreement.
(h) Reformation. If a court of competent jurisdiction
determines that the limitations as to time, geographical area or
scope of activity to be restrained contained herein are not
reasonable and impose a greater restraint than is necessary to
protect the goodwill or other business interest of the Employer,
then the parties agree that such court should (and Employee will
request such court to) reform this Agreement to the extent
necessary to cause the limitations contained herein as to time,
geographical area and scope of activity to be restrained to be
reasonable and to impose a restraint that is not greater than
necessary to protect the goodwill or other business interests of
the Employer and such court then shall enforce this Agreement as
reformed.
6. Prohibition of Disparaging Remarks. Employee shall, during the
term of this Agreement, refrain from making disparaging, negative or
other similar remarks concerning Employer, any of its subsidiaries or
other affiliated companies, to any third party that causes substantial
harm to Employer, except to the extent that Employee is required to
make such remarks (a) by applicable law or regulation or judicial or
regulatory process or (b) in or in connection with any pending or
threatened litigation relating to this Agreement or any transaction
contemplated hereby or thereby. Similarly, Employer shall, during the
term of this Agreement, refrain from making disparaging, negative or
other similar remarks concerning Employee to any third party except to
the extent that Employer is required to make such remarks (a) by
applicable law or regulation or judicial or regulatory process or (b)
in or in connection with any pending or threatened litigation relating
to this Agreement or any transaction contemplated hereby or thereby. In
view of the difficulty of determining the amount of damages that may
result to the parties hereto from the breach of the provision of this
Section 6, it is the intent of the parties hereto that, in addition to
monetary damages, any non- breaching party shall have the right to
prevent any such breach in equity or otherwise, including without
limitation prevention by means of injunctive relief.
7. Termination Events.
(a) This Agreement and the employment relationship created
hereby shall terminate upon the occurrence of any of the
following events:
(i) The expiration of the Term or any renewal period
as set forth in Section 3 above, provided that either
Employee or Employer has given at least thirty (30) days
prior written notice to the other party of such party's
intention not to renew;
(ii) The death of Employee;
(iii) The "Disability" (as hereinafter defined) of
Employee;
5
(iv) Written notice from Employer to Employee of
termination for "Just Cause" (as hereinafter defined); or
(v) Thirty (30) days written notice by Employee to
Employer for "Good Reason" (as hereinafter defined)
provided that the event constituting Good Reason occurs
within two (2) years of a "Change in Control" (as
hereinafter defined).
(b) Definitions.
(i) For purposes of Section 7(a)(iii) above, the "Disability" of
Employee shall mean a physical or mental infirmity which impairs
the Employee's ability to substantially perform his duties under
this Agreement for a period of 120 consecutive days or for 120
days out of any 150 consecutive day period.
(ii) For purposes of Section 7(a)(iv) above, "Just Cause" shall
mean:
(1) the failure of Employee to diligently or
effectively perform his duties under this Agreement;
(2) If Employee has been accused of
sexually-harassing another individual and such
accusation is either confirmed by Employer upon its
own investigation or confirmed by a finding of a
court of competent jurisdiction or the EEOC;
(3) the commission by Employee of any act involving
moral turpitude or the commission by Employee of any
act or the suffering by Employee of any occurrence or
state of facts which renders Employee incapable of
performing his duties under this Agreement, or
adversely affects or could reasonably be expected to
adversely affect Employer's business reputation;
(4) any breach by Employee of any of the material
terms of, or the failure to perform any material
covenant contained in, this Agreement; or
(5) the violation by Employee of material
instructions or material policies established by
Employer with respect to the operation of its
business and affairs or Employee's failure, in a
material respect, to carry out the reasonable
instructions of the President or the Board of
Employer;
provided, however, that no termination of Employee's employment
shall be for Just Cause under Section 7(a)(iv) until there shall
have been delivered to the Employee a copy of a written notice
setting forth that the Employee was guilty of the particular
conduct and specifying the particulars thereof in detail, and the
Employee shall have been provided an opportunity to be heard by
the entire Board.
6
(iii) For purposes of Section 7(a)(v) above, the term "Good
Reason" shall mean the occurrence of any of the events or
conditions described in items (1) through (7) below within two
(2) years after a Change in Control has occurred:
(1) A substantial adverse change in the Employee's
status, position or responsibilities (including
reporting responsibilities) which represents an
adverse change from his status, position or
responsibilities as in effect immediately prior
thereto;
(2) Any reduction in the Employee's Base Salary;
(3) The Employer's requiring the Employee to be based
at any place outside fifty (50) miles from Irving,
Texas, except for reasonably required travel in
connection with the Employer's business which is not
greater than such travel requirements prior to the
Change in Control;
(4) The insolvency of Employer or the filing (by any
party, including the Employer) of a petition for the
bankruptcy of the Employer;
(5) Any material breach by the Employer of any
provision of this Agreement;
(6) Any purported termination of the Employee's
employment for Just Cause by the Employer which does
not comply with the terms of Section 7(a)(iv) or
Section 7(b)(ii); or
(7) The failure of the Employer to obtain an
agreement, satisfactory to the Employee, from any
successor or assignee of the Employer to assume and
agree to perform this Agreement, as contemplated in
Sections 2, 3, 7 and 8 hereof.
(iv) For purposes of Section 7(a)(v) above, the term "Change in
Control" of the Employer shall mean if any of the following
events have occurred:
(1) An acquisition of any voting securities of the
Employer (the "Voting Securities") by a "Person" (as
that term is used for the purposes of Section 13(d)
of the Exchange Act) immediately after which such
person has "Beneficial Ownership" (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of
one hundred percent (100%) or more of the combined
voting power of the Employer's then outstanding
Voting Securities; or
(2) The following events have occurred during a one
(1) year period:
(a) The Chief Executive Officer changes for any
reason; and
(b) An acquisition of any voting securities of
the Employer (the "Voting Securities") by a
"Person" (as that term is used for the purposes
of Section 13(d) of the Exchange Act)
immediately after which such
7
person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the
Exchange Act) of forty percent (40%) or more of
the combined voting power of the Employer's then
outstanding Voting Securities; and
(c) The individuals who, as of January 1, 2003,
and each January 1 thereafter are members of the
Board (the "Incumbent Board") cease to
constitute at least fifty-one percent (51%) of
the members of the Board.
8. Termination Payments.
(a) In the event of the termination of Employee's employment for
any reason specified in Section 7 (other than the reasons set
forth in Sections 7(a)(iii) or Section (a)(v)), Employee shall be
entitled only to the compensation earned by him as of the
effective date of termination, including any declared but unpaid,
bonus or pro-rata portion thereof.
(b) In the event of the termination of Employee's employment as
the result of Section 7(a)(iii), Employee shall be entitled to
compensation for the remaining term of the Agreement until the
disability insurance company begins making payments to the
Employee.
(c) In the event of the termination of the Employee's employment
for the reason specified in Section 7(a)(v), Employee shall be
entitled to receive, immediately in one lump sum, two (2) times
the sum of the following: (i) the current Base Salary, plus (ii)
annualized bonus from the previous year, plus (iii) the value of
the car allowance for the current year.
(d) In addition, any medical, dental and group life insurance
covering the Employee and his dependents shall continue until the
earlier of (i) twelve (12) months after the Change in Control or
(ii) the date the Employee becomes a participant in the group
insurance benefit program of a new employer, with the
understanding that the Employer shall pay for such benefits for
the Employee, and the Employee shall pay for that portion of the
premiums related to the coverage for Employee's dependents.
(e) If the Employee pays or becomes obligated to pay any excise
tax under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") on any payment or benefit he receives
(whether pursuant to this Agreement or otherwise) in connection
with the event giving rise to his right to receive payments and
benefits under Section 8(c) of this Agreement, the Employer shall
pay to the Employee an amount equal to the total excise tax paid
or payable.
9. Remedies. Each party recognizes and acknowledges that in the
event of any default in, or breach of any of, the terms, conditions and
provisions of this Agreement (either actual or threatened) by the other
party, then the non-defaulting party's remedies at law shall be
inadequate. Accordingly, each party agrees that in such event, the
non-defaulting party shall
8
have the right of specific performance and/or injunctive relief in
addition to any and all other remedies and rights at law or in equity,
and such rights and remedies shall be cumulative.
10. Acknowledgments. Employee acknowledges and recognizes that the
enforcement of any of the non-competition provisions set forth in
Section 5 above by Employer will not interfere with Employee's ability
to pursue a proper livelihood. Employee recognizes and agrees that the
enforcement of this Agreement is necessary to ensure the preservation
and continuity of the business and good will of Employer. Employee
agrees that due to the nature of Employer's business, the
non-competition restrictions set forth in this Agreement are reasonable
as to time and geographic area. Employer and Employee hereby agree that
notwithstanding any other provision of this Agreement, Employee shall
have all rights to products or information, or applications of such
information, which do not relate to Employer's business and were
developed during the non-employment hours and without utilizing any
resources of Employer.
11. Notices. Any notices, consents, demands, requests, approvals and
other communications to be given under this Agreement by either party
to the other shall be deemed to have been duly given in writing
personally delivered, by facsimile or sent by mail, registered or
certified, postage prepaid with return receipt requested, as follows:
If to Employer: 000 Xxxx Xxx Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Employee: 0000 Xxxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Notices delivered personally shall be deemed communicated as of actual
receipt or receipt of facsimile; mailed notices shall be deemed
communicated as of three (3) days after mailing.
12. Survival. The following sections of this Agreement shall survive
termination of this Agreement for any reason: Sections 5, 6, 7, 8, 9,
11, 13, 14, 15, 16 and 17.
13. Arbitration. The parties agree to binding arbitration in any
action, proceeding or counterclaim arising out of or relating to this
Agreement. Such arbitration will be conducted in Dallas, Texas through
the offices of and in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. Judgment upon the award
rendered in any arbitration may be entered in any court of competent
jurisdiction or application may be made to such court for a judicial
acceptance of the award and an enforcement, as the law of such
jurisdiction may require or allow.
9
14. Entire Agreement. This Agreement contains the entire agreement of
the parties hereto and supersedes all prior agreements and
understandings, oral or written between the parties hereto. No
modification or amendment of any of the terms, conditions or provisions
herein may be made otherwise than by written agreement signed by the
parties hereto.
15. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
16. Parties Bound. This Agreement and the rights and obligations
hereunder shall be binding upon and inure to the benefit of Employer
and Employee, and their respective heirs, personal representatives,
successors and assigns. Employer shall have the right to assign this
Agreement to any affiliate or to its successors or assigns provided
that such affiliate, successor or assign agrees to be bound by the
terms hereof. The terms "successors" and "assigns" shall include any
person, corporation, partnership or other entity that buys all or
substantially all of Employer's assets or all of its stock, or with
which Employer merges or consolidates. The rights, duties or benefits
to Employee hereunder are personal to him, and no such right or benefit
may be assigned by him.
17. Estate. If Employee dies prior to the payment of all sums owed,
or to be owed, to Employee pursuant to Section 4 above, then such sums,
as they become due, shall be paid to Employee's estate.
18. Enforceability. If, for any reason, any provision contained in
this Agreement should be held invalid in part by a court of competent
jurisdiction, then it is the intent of each of the parties hereto that
the balance of this Agreement be enforced to the fullest extent
permitted by applicable law. It is the intent of each of the parties
that the covenants not-to-compete contained in Section 5 above be
enforced to the fullest extent permitted by applicable law.
Accordingly, should a court of competent jurisdiction determine that
the scope of any covenant is too broad to be enforced as written, it is
the intent of each of the parties that the court should reform such
covenant to such narrower scope as it determines enforceable.
19. Waiver of Breach. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by any party.
20. Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms
or provisions hereof.
21. Costs. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which he or it may be
entitled.
22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same instrument, but only one of
which need be produced.
10
EMPLOYER:
GRUY PETROLEUM MANAGEMENT CO.
By: /s/ Xxxx X. Xxxxx
-------------------------------
Xxxx X. Xxxxx
Chief Executive Officer
EMPLOYER'S PARENT COMPANY:
MAGNUM HUNTER RESOURCES, INC.
By: /s/ Xxxx X. Xxxxx
-------------------------------
Xxxx X. Xxxxx, Chairman
President and CEO
EMPLOYEE:
/s/ Xxxxxxx X. Xxxxx
----------------------------------
Xxxxxxx X. Xxxxx
11
