THIS AGREEMENT IS SUBJECT TO ARBITRATION
STATE OF TEXAS ss.
ss.
COUNTY OF DALLAS ss.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of February 29, 2008, but effective as of February 1, 2008 (the "Effective
Date"), by and between CUBIC ENERGY, INC., a Texas corporation (the "Company"),
and XXXXXX X. XXXXXX, III (the "Employee").
WHEREAS, the Company desires to enter into an employment relationship
with the Employee on certain terms and conditions as set forth herein; and
WHEREAS, the Employee is willing to accept such employment;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and promises hereinafter contained, do hereby agree as follows:
1. Employment. The Company hereby employs Employee in the capacity of
President and Chief Executive Officer, or in such other positions of the same or
greater stature as the Company may direct or desire, and Employee hereby accepts
the employment, on the terms and conditions hereinafter set forth.
2. Duties. The Employee's principal duties and responsibilities shall
be as set forth in the Bylaws of the Company. The Employee agrees to perform
such services and duties and hold such offices as may be assigned to him from
time to time by the Company and to devote a reasonable amount of time,
consistent with past practices, to the performance thereof. It is understood
that Employee has and will have other oil and gas business endeavors, but
Employee is hereby agreeing to devote the majority of his time, if not more, to
his duties on behalf of Employer.
3. Term. The term of employment under this Agreement shall begin on
the Effective Date and continue until terminated as herein provided.
4. Salary and Other Compensation. As compensation for the services to
be rendered by the Employee to the Company pursuant to this Agreement, the
Employee shall be paid the following compensation and other benefits:
(a) Salary: $16,666.67 per month, payable in accordance with the
Company's ordinary payroll practices, and subject to all applicable withholding
obligations, or such higher compensation as may be established by the Company
from time to time. Should the employee become "Partially Disabled," which for
purposes of this subsection means the inability because of any physical or
emotional illness to perform his assigned duties under this Agreement, the
Employee's Salary shall nevertheless be paid in full prior to the Employee's
termination pursuant to Section 10. If the Employee, during any period of
Partial Disability, receives any periodic payments representing lost
compensation under any health and accident policy or under any salary
continuation insurance policy, the premiums for which have been paid by the
Company, the amount of Salary that the Employee would be entitled to receive
from the Company during the Partial Disability shall be decreased by the amounts
of such payments.
(b) Stock Grant: The Company shall issue to the Employee
restricted shares of Common Stock, on such dates and in such amounts as may be
determined by the Compensation Committee and/or the Board of Directors of the
Company.
(c) Employee Benefit Plans: The Employee shall be eligible to
participate, to the extent he may be eligible, in any profit sharing,
retirement, insurance or other employee benefit plan maintained by the Company.
The Employee acknowledges and agrees that he shall not be
entitled to any additional compensation with respect to his service on the
Company's Board of Directors or on any committee thereof.
5. Life and Health Insurance. The Company, in its discretion, may
apply for and procure in its own name and for its own benefit, life insurance on
the life of the Employee in any amount or amounts considered advisable by the
Company, and the Employee shall submit to any medical or other examination and
execute and deliver any application or other instrument in writing, reasonably
necessary to effectuate such insurance. The Company may provide health
insurance, including major medical coverage, for the Employee. All insurance
provided to Employee shall be in such form and provide such coverage as may be
determined by the Board of Directors or the Compensation Committee of the Board
of Directors.
6. Vacations and Leave. The Employee shall be entitled to the same
vacation and leave time as the other executive officers of the Company, or as
otherwise approved by the Board of Directors.
7. Non-Disclosure of Confidential Information. The Employee
acknowledges that in and as a result of his employment by the Company, he will
be making use of, acquiring, and/or adding to confidential information of a
special and unique nature and value relating to such matters as the Company's
patents, copyrights, proprietary information, trade secrets, systems,
procedures, manuals, confidential reports, and lists of customers (which are
deemed for all purposes confidential and proprietary), as well as the nature and
type of services rendered by the Company, the equipment and methods used, and
the fees paid by the Company in obtaining services. As a material inducement to
the Company to enter into this Agreement and to pay to Employee the compensation
stated in Section 4, the Employee covenants and agrees that he shall not, at any
time during or following the term of his employment, directly or indirectly
divulge or disclose for any purpose whatsoever any confidential information that
has been obtained by, or disclosed to, him as a result of his employment by the
Company, except to affiliates of the Company.
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8. Reasonableness of Restrictions
(a) The Employee has carefully read and considered the provisions
of Section 7, and, having done so, agrees that the restrictions set forth in
that section, including, but not limited to, the time period of restriction is
fair and reasonable and is reasonably required for the protection of the
interests of the Company and its subsidiary and affiliated entities, officers,
directors, shareholders, and other employees.
(b) In the event that, notwithstanding the foregoing, any of the
provisions of Section 7 shall be held to be invalid or unenforceable, the
remaining provisions thereof shall nevertheless continue to be valid and
enforceable as though the invalid or unenforceable parts had not been included
therein. In the event that any provision of Section 7 shall be declared by a
court of competent jurisdiction to exceed the maximum restrictiveness such court
deems reasonable and enforceable, restrictions deemed reasonable and enforceable
by the court shall become and thereafter be the maximum restrictions in such
regard, and the restrictions shall remain enforceable to the fullest extent
deemed reasonable by such court.
9. Remedies for Breach of Employee's Covenant of Non-Disclosure. In
the event of a breach or threatened breach of any of the covenants in Section 7,
the Company shall have the right to seek monetary damages for any past breach
and equitable relief, including specific performance by means of an injunction
against the Employee or against the Employee's affiliates, agents,
representatives, servants, employers, employees, family members and/or any and
all persons acting directly or indirectly by or with him, to prevent or restrain
any such breach.
10. Termination. Employment of the Employee under this Agreement
may/will be terminated:
(a) Death. By the Employee's death.
(b) If the Employee is Totally Disabled. For the purposes of this
Agreement, the Employee will be Totally Disabled if he (i) has been declared
legally incompetent by a final court decree (the date of such decree being
deemed to be the date on which the disability occurred), (ii) receives
disability insurance benefits from any disability income insurance policy
maintained by the Company for a period of six (6) consecutive months, or (iii)
has been found to be disabled pursuant to a Disability Determination. A
Disability Determination means a finding that the Employee, because of a
medically determinable disease, injury, or other mental or physical disability,
is unable to perform substantially all of his regular duties to the Company and
that such disability is determined or reasonably expected to last at least
twelve (12) months. The Disability Determination shall be based on the written
opinion of the physician regularly attending the Employee. If the Company
disagrees with the opinion of this physician (the "First Physician"), it may
engage at its own expense another physician (the "Second Physician") to examine
the Employee. If the First and Second Physicians agree in writing that the
Employee is or is not disabled, their written opinion shall, except as otherwise
set forth in this subsection, be conclusive on the issue of disability. If the
First and Second Physicians disagree on the disability of the Employee, they
shall choose a third consulting physician (whose expense shall be borne by the
Company), and the written opinion of a majority of these three physicians shall,
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except as otherwise provided in this subsection, be conclusive as to the
Employee's disability. The date of any written opinion conclusively finding the
Employee to be disabled is the date on which the disability will be deemed to
have occurred. If there is a conclusive finding that the Employee is not Totally
Disabled, the Company shall have the right to request additional Disability
Determinations provided it agrees to pay all the expenses of the Disability
Determinations and does not request an additional Disability Determination more
frequently than once every three (3) months. In conjunction with a Disability
Determination, the Employee hereby consents to any required medical examination,
and agrees to furnish any medical information requested by any examining
physician and to waive any applicable physician-patient privilege that may arise
because of such examination. All physicians except the First Physician must be
board-certified in the specialty most closely related to the nature of the
disability alleged to exist.
(c) By the Company for Just Cause. This Agreement and the
Employee's employment with the Company may be terminated for Just Cause at any
time in accordance with Section 11. For purposes of this Agreement, Just Cause
shall mean only the following: (i) a conviction of or a plea of guilty or nolo
contendre by the Employee to a felony or misdemeanor involving fraud,
embezzlement, theft or dishonesty or other criminal conduct, (ii) habitual
neglect of the Employee's duties or failure by the Employee to perform or
observe any substantial lawful obligation of such employment that is not
remedied promptly following written notice or (iii) any material breach by the
Employee of this Agreement that is not remedied promptly following written
notice. Should the Employee dispute whether he was terminated for Just Cause,
then the Company and the Employee shall enter immediately into binding
arbitration pursuant to the Commercial Arbitration Rules of the American
Arbitration Association, the cost of which shall be borne by the substantially
non-prevailing party.
(d) By Employee for Good Reason. This Agreement and the
Employee's employment with the Company may be terminated at any time, at the
election of the Employee, for Good Reason in accordance with Section 11 and such
termination for Good Reason shall be treated as an involuntary separation from
service within the meaning of Section 409A of the Internal Revenue Code of 1986,
as amended (the "Code") and the Treasury regulations promulgated thereunder. As
used in this Agreement, Good Reason shall mean (i) the assignment to the
Employee of duties inconsistent with the title of President and Chief Executive
Officer of the Company or his then current office, or a material diminution in
the Employee's then current authority, duties or responsibilities; (ii) the
material diminution of the Employee's then current Salary or other action or
inaction that constitutes a material breach of this Agreement by the Company;
(iii) the relocation of the Company's principal executive offices to a location
more than fifty (50) miles from the Company's then current offices or the
transfer of the Employee to a place other than the Company's principal executive
offices (excepting required travel on the Company's business). Prior to any
termination at the election of the Employee for Good Reason, the Employee must
provide notice to the Company within ninety (90) days of the initial occurrence
of such event upon which Good Reason is based, and provide the Company not less
than thirty (30) days to cure such event in which case the Company shall not be
required to make the payments required by Section 12(b).
(e) Expiration of Time. At the end of 36 months from the
Effective Date (the "Term"); provided, however, that the Term shall be extended
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automatically at the end of each month by one additional month unless by such
date the Compensation Committee or the Board of Directors gives written notice
to the Employee that the Term shall not be so extended. Such notice may indicate
that it shall have the effect of preventing any further extension of the Term.
11. Notice of Termination. Any purported termination of the Employee's
employment, either by the Company for Just Cause or by the Employee for Good
Reason, shall be communicated by a written Notice of Termination to the other
party hereto. Such notice shall indicate a specific termination provision in
this Agreement which is relied upon, recite the facts and circumstances claimed
to provide the basis for such termination and specify the Date of Termination.
As used in this Agreement, Date of Termination shall mean the date specified in
the Notice of Termination, if Notice of Termination is required pursuant to the
previous sentence, which date shall not be less than thirty (30) nor more than
sixty (60) days from the date the Notice of Termination is given. If Notice of
Termination is not so required, then the Date of Termination shall be the date
of the event giving rise to such termination. If within thirty (30) days from
the date the Notice of Termination is given, the party receiving such notice
notifies the other party that a dispute exists concerning such termination, the
Date of Termination shall be the date on which the dispute is finally resolved.
The Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute by entering immediately into binding arbitration
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association, the cost of which shall be borne by the substantially
non-prevailing party. Notwithstanding the pendency of any such dispute, the
Company will continue to pay the Employee his full Salary in effect as of the
date of the Notice of Termination and continue the Employee as a participant in
all compensation, benefit and insurance plans in which he was participating at
such date, until the dispute is finally resolved. Notwithstanding the preceding
or any provision of this Agreement to the contrary, the Employee's termination
shall not be considered for Good Reason unless any dispute with respect to such
Good Reason termination is resolved and the Employee's Date of Termination is
not later than two (2) years from the initial occurrence of the event upon which
Good Reason is based.
12. Payments Upon Termination. Payments to the Employee upon
termination shall be as follows:
(a) If the Employee is terminated upon death pursuant to Section
10(a), Total Disability pursuant to Section 10(b), Just Cause pursuant to
Section 10(c) or time pursuant to Section 10(e), the Employee shall be entitled
to all arrearages of Salary as of the Date of Termination but shall not be
entitled to further compensation.
(b) If the Employee terminates for Good Reason pursuant to
Section 10(d), or if the Employee is terminated by the Company other than
pursuant to Section 10(a), the Employee shall be entitled to all remaining
Salary under this Agreement to the end of the Term, payable in a lump sum amount
on the first business day of the payroll period next following the Date of
Termination, subject to the provisions of Section 13 (the "Severance Payment");
and, in addition, be entitled to receive all stock compensation pursuant to
Section 4(b) through the end of the Term.
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13. Limitation or Payments Upon Termination; Deferral of Payments.
(a) Change in Control. As used in the Agreement, the term "Change
in Control" shall mean:
(i) a change in the ownership of the Company which
shall be deemed to occur on the date that any one
person, or more than one person acting as a group
(as determined under Section 13(b)(i)), acquires
ownership of stock of the Company that, together
with stock held by such person or group, has more
than 50% of the total fair market value or total
voting power of the stock of the Company;
provided, however, if any one person, or more than
one person acting as a group, is considered to own
more than 50% of the total fair market value or
total voting power of the stock of the Company,
the acquisition of additional stock by the same
person or persons is not considered to cause a
change in the ownership of the Company;
(ii) a change in the effective control of the Company
which shall be presumed to occur on the date that
either (A) any one person, or more than one person
acting as a group (as determined under Section
13(b)(i)), acquires (or has acquired during the
12-month period ending on the date of the most
recent acquisition by such person or persons)
ownership of stock of the Company possessing 20%
or more of the total voting power of the stock of
the Company, or (B) a majority of members of the
Board of Directors of the Company is replaced
during any 12-month period by directors whose
appointment or election is not endorsed by a
majority of the members of the Board of Directors
of the Company prior to the date of the
appointment or election; or
(iii) a change in the ownership of a substantial portion
of the Company's assets which shall be deemed to
occur on the date that any one person, or more
than one person acting as a group (as determined
under Section 13(b)(ii)), acquires (or has
acquired during the 12-month period ending on the
date of the most recent acquisition by such person
or persons) assets from the Company that have a
total gross fair market value equal to or more
than one-third of the total gross fair market
value of all of the assets of the Company
immediately prior to such acquisition or
acquisitions; provided that for this purpose,
gross fair market value means the value of the
assets of the Company, or the value of the assets
being disposed of, determined without regard to
any liabilities associated with such assets.
The determination of whether a Change in Control of the Company has occurred for
purposes of this Section 13(a) shall be made in accordance with the Treasury
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regulations promulgated under Section 280G of the Code. The presumption under
Section 13(a)(ii) that a Change in Control of the Company has occurred by reason
of the occurrence of an event described in Section 13(a)(ii) may be rebutted by
establishing that such acquisition or acquisitions of the stock of the Company,
or such replacement of the majority of the members of the Board of Directors of
the Company, does not transfer the power to control (directly or indirectly) the
management and policies of the Company from any one person (or more than one
person acting as a group as determined under Section 13(b)(i)) to another person
(or group).
(b) Persons Acting as a Group. For purposes of determining
whether a Change in Control of the Company has occurred under Section 13(a):
(i) persons shall not be considered to be acting as a
group for purposes of Section 13(a)(i) or Section
13(a)(ii) merely because they happen to purchase
or own stock of the Company at the same time, or
as a result of the same public offering; provided,
however, persons shall be considered to be acting
as a group if they are owners of a corporation
that enters into a merger, consolidation, purchase
or acquisition of stock, or similar business
transaction with the Company; and
(ii) persons shall not be considered to be acting as a
group for purposes of Section 13(a)(iii), merely
because they happen to purchase assets of the
Company at the same time, or as a result of the
same public offering; provided, however, persons
shall be considered to be acting as a group if
they are owners of a corporation that enters into
a merger, consolidation, purchase or acquisition
of assets, or similar business transaction with
the Company.
(c) Possible Reduction of Severance Payment. If the Employee is
terminated without Just Cause or the Employee terminates his employment for Good
Reason within the period beginning one year before and ending one year after the
Change in Control of the Company, and the presumption, if any, under the
Treasury regulations promulgated under Section 280G of the Code that such
employment termination was contingent on that Change in Control is not
successfully rebutted, then the Severance Payment specified in Section 12(b)
shall be adjusted as set forth below:
(i) The Severance Payment shall be reduced to an
amount equal to 2.99 times the average of the
annual compensation which was payable to the
Employee by the Company and includible in the
Employee's gross income for federal income tax
purposes for the five (5) calendar years ending
before the calendar year in which a Change in
Control occurred, or for the portion of such
period during which the Employee was actually
employed by the Company if the Employee has been
employed by the Company for less than five (5)
calendar years (the "Base Period"). The Employee's
average annual compensation shall be determined in
accordance with the Treasury regulations
promulgated under Section 280G(d) of the Code. As
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used in this Agreement, the term "compensation"
shall mean and include every type and form of
compensation includible in the Employee's gross
income in respect of his employment by the
Company, including compensation income recognized
as a result of the exercise of stock options or
sale of the stock so acquired, except to the
extent otherwise provided in the Treasury
regulations promulgated under Section 280G(d) of
the Code.
(ii) The Severance Payment shall be further reduced by
the amount of any other payment or the value of
any benefit received or to be received by the
Employee in connection with the termination of his
employment or contingent upon a Change in Control
(whether payable pursuant to the terms of this
Agreement, any other plan, agreement or
arrangement with the Company) unless (A) the
Employee shall have effectively waived in writing
his receipt or enjoyment of such payment or
benefit prior to the date of payment or receipt of
the Severance Payment, (B) in the opinion of tax
counsel selected by the Company, such other
payment or benefit does not constitute a
"parachute payment" within the meaning of Section
280G(b)(2) of the Code, or (C) in the opinion of
such tax counsel, the Severance Payment (in its
full amount or as partially reduced, as the case
may be) plus all other payments or benefits which
constitute "parachute payments" within the meaning
of Section 280G(b)(2) of the Code are deductible
by the Company. The value of any non-cash benefit
or any deferred payment shall be determined by the
independent auditors of the Company in accordance
with the principles of Section 280G(d) (3) and (4)
of the Code.
(d) Deferral of Payment Date Under Section 12(b). No payment of
the Severance Payment, as reduced in accordance with Section 13(c), shall be
paid during the six-month period following the Employee's Date of Termination
unless the Company determines that the Employee is not a "specified employee"
(as that term is defined in the Treasury regulations promulgated Section 409A of
the Code), or if the Company determines that the Employee is a "specified
employee," that paying such amount would not cause the Employee to incur an
additional tax under Section 409A of the Code. The six-month delay required by
the preceding sentence shall not apply to the extent (i) the amount of such
reduced Severance Payment, or any portion thereof, constitutes a short-term
deferral within the meaning of the Treasury regulations promulgated under
Section 409A of the Code, and (ii) to the extent the amount of such reduced
Severance Payment does not constitute a short-term deferral, the amount of such
reduced Severance Payment, or any portion thereof, does not exceed two times the
lesser of (A) the Employee's annualized compensation based upon the Employee's
annual rate of pay for services provided to the Company for the taxable year of
the Employee preceding the taxable year in which the Date of Termination occurs
(adjusted for any increase during that year that was expected to continue
indefinitely had no separation from service occurred), or (B) the maximum amount
that may be taken into account under a qualified plan pursuant to Section
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401(a)(17) of the Code for the year in which the Date of Termination occurs. If
the payment of any amount of the reduced Severance Payment is delayed as a
result of the application of this Section 13(d), on the first business day
following the end of the six-month delay period, the Company shall pay the
Employee a lump-sum amount equal to the amount that would have otherwise been
previously paid to the Employee under Section 12(b) during such six-month delay
period. The provisions of this Section 13(d) shall apply only to the minimum
extent necessary, after application of the Treasury regulations under Section
409A of the Code, to avoid the Employee's incurrence of any additional taxes or
penalties under Section 409A of the Code. Notwithstanding anything to the
contrary contained herein, the Company shall not be responsible for, or have any
obligation to reimburse or pay (as damages or otherwise) any taxes or interest
charges imposed on the Employee pursuant to Section 409A of the Code.
14. Resignation Upon Termination. In the event of termination of this
Agreement other than for death, the Employee hereby agrees to resign from all
positions held in the Company, including without limitations any position as a
director, officer, agent, trustee or consultant of the Company or any affiliate
of the Company. For the purposes of this provision, the term "affiliate" means
any entity that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the Company.
15. Waiver. A party's failure to insist on compliance or enforcement
of any provision of this Agreement, shall not affect the validity or
enforceability or constitute a waiver of future enforcement of that provision or
of any other provision of this Agreement by that party or any other party.
16. Governing Law. This Agreement shall in all respects be subject to,
and governed by, the laws of the State of Texas.
17. Severability. The invalidity or unenforceability of any provision
in the Agreement shall not in any way affect the validity or enforceability of
any other provision and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision had never been in the Agreement.
18. Notice. Any and all notices required or permitted herein shall be
deemed delivered if delivered personally or if mailed by registered or certified
mail to the Company at its principal place of business and to the Employee at
the address hereinafter set forth following the Employee's signature, or at such
other address or addresses as either party may hereafter designate in writing to
the other.
19. Assignment. This Agreement, together with any amendments hereto,
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors, assigns, heirs and personal representatives, except
that the rights and benefits of the parties under this Agreement may not be
assigned without the prior written consent of the other party.
20. Amendments. This Agreement may be amended at any time by mutual
consent of the parties hereto, with any such amendment to be invalid unless in
writing, signed by the Company and the Employee.
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21. Entire Agreement. This Agreement, along with the Company handbook
to the extent it does not specifically conflict with any provision of this
Agreement, contains the entire agreement and understanding by and between the
Employee and the Company with respect to the employment of the Employee, and no
representations, promises, agreements, or understandings, written or oral,
relating to the employment of the Employee by the Company not contained herein
shall be of any force or effect.
22. References to Gender and Number Terms. In construing this
Agreement, feminine or number pronouns shall be substituted for those masculine
in form and vice versa, and plural terms shall be substituted for singular and
singular for plural in any place which the context so requires.
23. Headings. The various headings in this Agreement are inserted for
convenience only and are not part of the Agreement.
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IN WITNESS WHEREOF, the Company and Employee have duly executed this
Agreement as of the date first above written.
COMPANY:
--------
CUBIC ENERGY, INC.
By: /s/ Xxx X. Xxxx
-----------------------
Name: Xxx Xxxxxx Xxxx
Title: Secretary
EMPLOYEE:
---------
/s/ Xxxxxx X. Xxxxxx, III
---------------------------
Xxxxxx X. Xxxxxx, III
Address for Notice:
-------------------
0000 Xxxxx Xxxx
Xxxxxx, XX 00000
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