PENNACO ENERGY, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 10th day of June, 1998 by and between
XXXX X. XXXX, residing at 000 Xxxx Xxxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx
00000 ("Executive"), and PENNACO ENERGY, INC., a Nevada corporation, with
offices at 0000 00xx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 (the "Company"),
for the purpose of setting forth the terms and conditions of Executive's
employment by the Company and to protect the Company's knowledge, expertise,
customer relationships and the confidential information the Company has
developed regarding clients, customers, shareholders, option holders, employees,
products, business operations and services. As of the Effective Date, this
Agreement supersedes any prior understandings or agreements between Executive
and the Company or any of the Company's subsidiaries or affiliates.
RECITALS:
WHEREAS, the Board desires to provide for the continued employment of
Executive and to make certain changes in Executive's employment arrangements
with the Company which the Board has determined will reinforce and encourage the
continued attention and dedication to the Company of Executive as a member of
the Company's management, in the best interest of the Company and its
shareholders. Executive is willing to commit himself to continue to serve the
Company, on the terms and conditions herein provided, although this Agreement
may be amended at any time by written agreement among the parties; and
WHEREAS, in order to effect the foregoing, the Company and Executive wish
to enter into an employment agreement on the terms and conditions set forth
below;
NOW THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. TIME AND EFFORTS
1.1 Executive shall be employed as the Company's President and Chief
Executive Officer and shall devote his full-time attention to the duties and
responsibilities of President and Chief Executive Officer in furtherance of the
Company's business. Subject to consultation with and the direction of the Board
of Directors, Executive shall have full responsibility for, and authority over,
the business of the Company.
1.2 In the performance of all of his responsibilities hereunder, Executive
shall be subject to all of the Company's policies, rules, and regulations
applicable to its officers and employees generally and its President and Chief
Executive Officer specifically. Executive shall report to the Board of
Directors.
1.3 The Company shall use its best efforts to cause Executive to be
elected a member of the Company's Board of Directors during the Term of this
Agreement (as defined in Section 2 below). In addition, Executive shall be able
to nominate a reasonably-qualified candidate for membership on the Board of
Directors, and the Company shall use reasonable efforts to cause such nominee to
be elected. The authorized number of members of the Board of Directors is not
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anticipated to exceed five; however, if the authorized number of members of the
Board of Directors is increased to seven, then Executive shall be able to
nominate two reasonably-qualified candidates for membership on the Board of
Directors.
1.4 Without the prior express authorization of the Board, Executive shall
not, directly or indirectly, during the Term of this Agreement engage in any
activity competitive with or adverse to the Company's business, whether alone,
as a partner or independent contractor, or as an officer, director, or employee
of any other corporation. This Agreement shall not be interpreted to prohibit
Executive from making passive personal investments, conducting private business
affairs, or engaging in educational or charitable activities, if those
activities do not materially interfere with the services required hereunder.
Subject to the reasonable prior approval of the Board, Executive may act as a
director of any profit or non-profit corporation or other business entity, if
such activity is not inconsistent with the business of the Company.
1.5 In order to induce the Company to enter into this Agreement, Executive
represents and warrants to the Company that (i) Executive is not a party or
subject to any employment agreement or arrangement with any other person, firm,
company, corporation or other business entity; and (ii) Executive is subject to
no restraint, limitation or restriction by virtue of any agreement or
arrangement, or by virtue of any law or rule of law or otherwise which would
impair Executive's right or ability to enter the employ of the Company or to
perform fully his duties and obligations pursuant to this Agreement.
1.6 Without first obtaining the written permission of the Board in each
instance, Executive will not authorize or permit the Company to engage the
services, of, or engage in any business activity with, or provide any financial
or other benefit to, any affiliate of Executive. The phrase "affiliate of
Executive" as used in this Agreement shall mean and include Executive's family
by blood or marriage (including, without limitation, parents, spouse, siblings,
children and in-laws), and any business or business entity which is directly or
indirectly owned or controlled by Executive or any member of Executive's family
or in which Executive or any member of Executive's family has any direct or
indirect financial interest whatsoever.
2. TERM
The initial Term of this Agreement is from June 1, 1998 (the "Effective
Date") until June 30, 2002; however on each anniversary of the Effective Date
after June 1, 2001, this Agreement shall be automatically renewed for a new
two-year Term from such anniversary date unless the Company notifies
Executive in writing 90 days prior to the anniversary of the Effective Date
that the Company will not be renewing this Agreement on the next anniversary
of the Effective Date, or unless sooner terminated pursuant to Section 4.
References hereinafter to the "Term" of this Agreement shall refer to both
the initial term and any extended term of Executive's employment hereunder.
3. COMPANY'S AUTHORITY
Executive agrees to observe and comply with the reasonable rules and
regulations of Company as adopted by the Board of Directors of the Company or
committee of the Board of Directors respecting performance of Executive's duties
and to carry out and perform orders, directions, and policies of Company as they
may be, from time-to-time, stated to Executive either verbally or in writing.
4. TERMINATION
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This Agreement shall be terminated upon the happening of any of the
following events:
4.1 Upon the death of Executive.
4.2 Whenever the Company and Executive shall mutually agree to
termination.
4.3 At the option of the Company, upon written notice by the Company to
Executive, for Cause. "Cause" shall exist for such termination if Executive (i)
pleads or is found guilty of a felony involving an act of dishonesty or moral
turpitude by a court of competent jurisdiction; (ii) has engaged in serious
misconduct, materially and demonstratively injurious to the company; (iii) has
made any material misrepresentation or omission to the Company under Section 1.5
hereof; (iv) has committed an unexcused material breach of his duty in the
course of Executive's employment; (v) has been guilty of habitual neglect of his
duties; (vi) has usurped a corporate opportunity, is guilty of fraudulent
embezzlement of property or funds of the Company, or committed any act of fraud
or intentional misrepresentation, moral turpitude, dishonesty or other
misconduct that would constitute a felony; or (vii) has committed a material,
unexcused breach of this Agreement.
4.4 The Company may terminate Executive's employment under this Agreement
at any time without Cause, subject to provisions for payment of compensation as
specified under Section 5.5 of this Agreement. Should the Company demote the
Executive below the status of President without Cause, this Agreement shall
terminate subject to provisions for payment of compensation as specified under
Section 5.5 of this Agreement.
4.5 At the option of Executive, upon 90 days written notice by Executive
to the Company.
4.6 If as a result of Executive's incapacity due to physical or mental
illness, Executive shall have been absent from his duties hereunder on a
full-time basis for the entire period of three consecutive months, and within
30 days after written notice of termination is given (which may occur before
or after the end of such three-month period) shall not have returned to the
performance of his duties hereunder on a full-time basis, the Company may
terminate Executive's employment hereunder.
4.7 Upon the expiration of the Term of this Agreement, or any extension or
renewal thereof.
5. CURRENT COMPENSATION
5.1 ANNUAL SALARY. For all services rendered by Executive under this
Agreement, the Company shall pay or cause to be paid to Executive, and Executive
shall accept the annual Salary and Incentive Compensation, if any, all in
accordance with the subject to the terms of this Agreement. For purposes of
this Agreement, the term "Compensation" shall mean the Annual Salary and Bonus
Compensation, if any. Executive shall be entitled to receive as current
compensation an annual salary in an amount of not less than $120,000 per annum
(hereinafter referred to as the "Annual Salary"). References in this Agreement
to "annual" or "per annum" or "Annual" and similar phrases shall mean the
twelve-month period commencing on May 1st of each year during the Term of this
Agreement unless otherwise indicated.
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5.2 BONUS COMPENSATION. Executive shall also be entitled to annual
incentive compensation ("Bonus Compensation") equal to 2% of the sum of the
Company's net after-tax earnings as reported in the Company's audited year-end
financial statements plus interest expense, deferred taxes, depletion expenses,
depreciation expenses, amortization expenses, and exploration expenses (which
sum is hereinafter referred to as "cash flow"). The parties agree that
exploration expenses would be deducted from net after-tax earning only if the
Company has elected the "successful-efforts" accounting method; if the Company
has elected the "full-cost" accounting method, exploration expenses would
already be deducted in the computation of the Company's net after-tax earnings,
subject to the additional provisions forth in Sections 5.2.1 and 5.2.2 below.
5.2.1 The parties agree that Bonus Compensation payments are
intended to be based on cash flow from undrilled Company-owned properties as
of the date of this Agreement and undrilled properties acquired by the
Company subsequent to the date of this Agreement. Should the Company acquire
proven-producing properties with existing cash flows, net income less the
hypothetical income tax due thereon plus interest expense, deferred taxes,
depletion expenses, depreciation expenses, amortization expenses, and
exploration expenses (which exploration expenses would only be added if the
Company has elected the "successful-efforts" accounting method) attributable
to the acquired, proven-producing properties shall be deducted from the base
amount upon which the cash flow is derived.
5.2.2 Should the Company acquire proven-producing properties with
existing cash flows, the parties agree to negotiate in good faith with respect
to the development of a schedule of the declining production profile of such
properties. The parties agree that the amount derived by multiplying the
proven-production stream, as set forth in the schedule, by the corresponding
sales price, less corresponding production costs shall be subtracted from the
cash flow upon which Bonus Compensation is based.
5.2.3 Bonus Compensation payments due hereunder shall be made
within 15 days after the Company has received the signed audit report covering
the year-end financial statements. No Bonus Compensation shall be earned until
the fiscal year end of each fiscal year during the this Agreement except as
allowed in Section 5.5 hereof.
5.3 401(k) PLAN. Executive shall be entitled to participate in the
Company's 401(k) or other similar retirement benefit plan. The Company agrees
to implement a 401(k) or other similar retirement benefit plan as soon as it is
reasonably feasible, based on the size of the Company and its financial
condition.
5.4 PAYMENTS OF CURRENT COMPENSATION. The payment of Executive's Annual
Salary shall be made in semi-monthly installments on the then prevailing paydays
of the Company. Any payment for Incentive Compensation will be made in
accordance with the Executive Incentive Compensation Plan, and payment will be
made in one lump sum concurrently with payments made to others in senior
management. All payments are subject to the customary withholding tax and other
employment taxes as required with respect to compensation paid to an employee.
5.5 PAYMENT OF COMPENSATION ON TERMINATION.
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5.5.1 Upon termination of Executive's employment prior to the
expiration of this Agreement, if such termination is pursuant to Section 4.1,
4.2, 4.5, 4.6, or 4.7 hereof, Executive shall be entitled to any Annual Salary,
Bonus Compensation, and vacation accrued but unpaid through the date of
termination of employment, payable on the date of termination. Executive shall
also be entitled to exercise any vested options for a period of 90 days
following the termination of his employment hereunder.
5.5.2 Upon termination of Executive's employment prior to the
expiration of this Agreement, if such termination is pursuant to Section 4.4
hereof, Executive shall be entitled to any Annual Salary, Bonus Compensation,
and vacation accrued but unpaid through the date of termination of employment,
payable on the date of termination. In addition, in the case of termination
pursuant to Section 4.4, the payment of $2,000,000 in cash if terminated prior
to the first anniversary of the Effective Date, and $3,000,000 in cash if
terminated pursuant to Section 4.4 after the first anniversary of the Effective
Date, which additional payments shall be made in quarterly installments.
Executive shall also be entitled to exercise any vested options for a period of
90 days following the termination of his employment hereunder. The provisions
of this Section 5.5.2 shall apply throughout the Term of this Agreement,
including any period of extension in accordance with the provisions of Section 2
above.
5.5.3 In the event that Executive is not serving as the President
and Chief Executive Officer during the term of this Agreement or is terminated
as a result of a change of control (as hereafter defined), Executive shall be
entitled to any Annual Salary, Bonus Compensation, and vacation accrued but
unpaid through the date of termination of employment, payable on the date of
termination. Upon termination as a result of a change of control, Executive
shall also be entitled to receive the payment set forth in Section 5.5.2, except
that in all circumstances the amount of the payment shall be $3,000,000, and
shall be entitled to exercise all granted stock options for a period of 180 days
following the termination of his employment hereunder.
5.5.4 For all purposes of this Agreement, a "change of control"
shall mean and shall be deemed to have occurred if: (i) there shall be
consummated (x) any consolidation or merger of the Company with another
corporation or entity and as a result of such consolidation or merger less than
50% of the outstanding voting securities of the surviving or resulting
corporation or entity shall be owned in the aggregate by the stockholders of the
Company, other than "affiliates," as defined in the Securities Exchange Act of
1934, as amended (the "Exchange Act"), of any party to such consolidation or
merger, as the same shall have existed immediately prior to such consolidation
or merger, or (Y) any sale, lease, exchange or other transfer (or in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company; (ii) the stockholders of the Company shall have
approved any plan or proposal for the liquidation or dissolution of the Company;
(iii) any "person" (as such term is used in the Section 13(d) and 14(d) (2) of
the Exchange Act) shall have become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of 50% or more of the Company's outstanding
common stock, without the prior approval of the Board; (iv) during any period
of two consecutive years, individuals who at the beginning of such period
constituted the entire Board of Directors shall have ceased for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new Director was approved by
vote of at least two-thirds of the Directors then still in office who were
Directors at the beginning of the period; (v) a change of control of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Exchange Act shall have occurred; (vi)
any consolidation or merger of the Company with another corporation or entity
and as a result of such consolidation or merger Executive is not retained by the
Board of Directors as the President and Chief Executive Officer of the Company.
6. DETERMINATION OF DISABILITY; PAYMENT OF DISABILITY INSURANCE PREMIUMS
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6.1 In the event Executive's disability, as defined in Section 4.6, is in
question, and after written request by the Company, Executive refuses to be
examined by his regularly attending physician or if the regularly attending
physician fails to submit a report within 30 days after the examination has been
requested by the Company, the determination of disability shall be made by the
Company.
6.2 Executive shall be entitled to the disability benefits available to
all executive employees of the Company.
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7. MISCELLANEOUS BENEFITS
7.1 MEDICAL INSURANCE. Executive and his family shall be entitled to
participate in any medical, dental, vision, life, long-term disability, other
insurance or employee benefit program instituted or maintained by the Company
for the benefit of its executive employees. It is the intent of the Company to
establish a medical and dental insurance program as soon practicable.
7.2 PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT. If Executive's
employment with the Company is terminated, Executive shall be entitled to
maintain his employee benefits in accordance with his maximum COBRA rights.
7.3 BUSINESS EXPENSES. Executive shall be reimbursed for all reasonable
expenses incurred by Executive in connection with Executive's attendance of
business meetings and promotion of Company business upon presentation by
Executive to the Company of an expense report and adequate records or other
documentation substantiating the expenditures, not less frequently than monthly.
Any such amounts disallowed as a business expense for federal or state income
tax purposes shall be deemed additional salary to Executive. The fact that the
Company may not reimburse Executive for an expense is not an indication that the
Company determined that the expense was not incurred on its behalf or in
connection with the Company's business.
7.4 ADDITIONAL BENEFITS. Executive shall be entitled to participate in
all programs, rights and benefits for which executive is otherwise entitled to
any bonus plan, incentive plan, participation plan or extra compensation plan,
pension plan, profit sharing plan, life, medical, dental, disability or other
insurance plan or policy or other plan or benefit the Company may provide for
senior executives or for employees of the Company generally from time to time in
effect during the term of this Agreement. For the avoidance of doubt, the
rights granted or afforded to Executive under any such plans shall be not less
than the most favorable rights and highest amounts granted to employees of
similar or lower position with the Company and on terms at least as favorable.
8. VACATION
During each calendar year of the Term of this Agreement, Executive shall be
entitled three weeks of paid vacation, earned ratably over the Term of each
calendar year during the Term of this Agreement. Executive shall be entitled to
receive payment for accrued vacation not taken during each calendar year during
the Term of this Agreement or may accrue such vacation for use in a subsequent
calendar year; however Executive shall be subject to a maximum of six weeks of
accrued vacation.
9. RESTRICTIVE COVENANTS
9.1 CONFIDENTIAL INFORMATION. Executive acknowledges that in his
employment hereunder he occupies a position of trust and confidence. During the
Term , and thereafter in accordance with the provisions of this Agreement,
Executive shall not, except as may be required to perform his duties hereunder
as required by applicable law, and except for information which is or becomes
publicly available other than as a result of a breach by Executive of the
provisions hereof, disclose to others or use, whether directly or indirectly,
any Confidential Information. "Confidential Information" shall mean information
about the Company, its subsidiaries and affiliates, and their respective
suppliers, clients and customers that is not disclosed by the Company for
financial reporting purposes and that was learned by Executive in the course of
his employment hereunder, including (without limitation) proprietary knowledge,
trade secrets, market research,
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data, formulae, information and supplier, client and customer lists and all
papers, resumes, and records (including computer records) of the documents
containing such Confidential Information. Executive agrees to deliver or
return to the Company, at the Company's request at any time or upon
termination or expiration of his employment, or as soon thereafter as
possible, all documents, computer tapes and disks, records, lists, data,
drawings, prints, notes and written information (and all copies thereof)
furnished by the Company or any of its subsidiaries affiliates or prepared by
Executive during the Term of his employment by the Company. The obligations
hereof shall not apply to any information which is or becomes public or in
the public domain by action of the Company or through no fault of Executive.
9.2 BUSINESS DIVERSION. During the term and for 30 months thereafter,
Executive shall not, directly or indirectly, influence or attempt to influence
customers or suppliers of the Company or any of its subsidiaries or affiliates
to divert their business to any competitor of the Company, to the exclusion of
the Company. However, Executive may contract with the same customers and
suppliers after the Term hereof so long as it is not to the exclusion of the
Company's relationships with such customers and suppliers.
9.3 NON-SOLICITATION. Executive recognizes that he will possess
confidential information about other employees of the Company and its
subsidiaries and affiliates relating to, among other things, their education,
experience, skills, abilities, compensation and benefits, and interpersonal
relationships with suppliers and customers of the Company. Executive recognizes
that the information he will possess about these other employees is not
generally known, is of substantial value to the Company, and will be acquired by
him because of his business position with the Company. Executive agrees that,
during the Term and for 12 months thereafter, he will not, directly or
indirectly, solicit or recruit any employee of the Company, its subsidiaries or
affiliates for the purpose of being employed by him or by any other person on
whose behalf he is acting as an agent, representative or employee and that he
will not convey any such confidential information or trade secrets about other
employees of the Company, including its subsidiaries or affiliates, to any other
person. However, if Executive's employment is terminated in accordance with the
provisions of Section 4.4, nothing herein shall prevent Executive from
soliciting or recruiting, directly or indirectly, any employee of the Company
recruited to the Company by Executive.
9.4 If Executive breaches, or threatens to commit a breach of, any of the
provisions of Section 9 (the "Restrictive Covenants"), the Company and its
subsidiaries shall have the right to the following:
9.4.1 SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company or its
subsidiaries and that money damages would not provide an adequate remedy to the
Company or its subsidiaries.
9.4.2 ACCOUNTING. The right and remedy to require Executive to
account for and pay over to the Company or its subsidiaries, as the case may be,
all compensation, profits, monies, accruals, increments or other benefits
derived or received by Executive as a result of any transaction constituting a
breach of the Restrictive Covenants.
9.4.3 SEVERABILITY OF RESTRICTIVE COVENANTS. Executive
acknowledges and agrees that the Restrictive Covenants are reasonable and valid
in geographic and temporal scope and in all other respects. If any court
determines at any of the Restrictive Covenants, or any part thereof, is invalid
or unenforceable, the remainder of the Restrictive Covenants shall not thereby
be affected and shall be given full effect without regard to the invalid
provisions.
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9.4.4 BLUE PENCILING. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographic scope or such provision, such court shall have the power
to reduce the duration or scope of such provision, as the case may be, and, in
its reduced form, such provision shall not be enforceable.
9.4.5 ENFORCEABILITY OF JURISDICTIONS. The obligations in this
Section 9 shall survive the termination of Executive's employment or expiration
of this Agreement and shall be fully enforceable thereafter. Executive intends
to and hereby confers jurisdiction to enforce the Restrictive Covenants upon the
courts of any jurisdiction within the geographic scope of such Restrictive
Covenants. If the courts of any one or more of such jurisdictions hold the
Restrictive Covenants unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of Executive that such determination not bar or
in any way affect the right of the Company or its subsidiaries to the relief
provided above in the courts of any other jurisdiction within the geographic
scope of such Restrictive Covenants, as to breaches of such Restrictive
Covenants in such other respective jurisdictions, such Restrictive Covenants as
they relate to each jurisdiction being, for this purpose, severable into diverse
and independent Restrictive Covenants.
10. PARTICIPATION IN STOCK AND OPTION EXECUTIVE COMPENSATION PLAN
10.1 Executive shall be granted (i) options (the "$2.50 Options") to
purchase 400,000 shares of Common Stock of the Company pursuant to the terms
and conditions contained in the Company's Stock and Option and Incentive
Award Plan, (the "Plan") at an exercise price equal to $2.50 per share; and
(ii) options (the "$5.00 Options") to purchase 400,000 shares of Common Stock
of the Company pursuant to the terms and conditions contained in the Plan at
an exercise price equal to $5.00 per share. The $2.50 Options and the $5.00
Options shall vest ratably over a four-year period on each anniversary of the
Effective Date.
10.2 Executive shall be granted options (the "Additional Options") to
purchase such number of shares of Common Stock of the Company that equals 1%
of the number of shares of Common Stock issued by the Company during the term
of this Agreement pursuant to capital-raising, merger, or acquisition
activities of the Company pursuant to which the Company issues any equity
securities, other than the Company's current placement of shares of Common
Stock at $3.25 per share. Additional Options will be granted pursuant to the
terms and conditions contained in the Plan at an exercise price equal to the
price of the shares of Common Stock issued by the Company in any such
transaction. The Additional Options shall be granted as of the closing of any
such transaction, shall vest 18 months from the date of grant, and shall
expire 48 months from the date of grant.
10.3 Executive shall be considered for additional grants of options,
stock appreciation rights, phantom stock rights, and any similar option or
securities or equity compensation when and as such grants are considered for
other executives or employees of the Company.
10.4 In the event of termination of Executive's employment pursuant to
a change in control, Executive shall be entitled to exercise all of the $2.50
Options, $5.00 Options, and any Additional Options that have been granted.
In the event of termination of Executive's employment pursuant to Section
4.4, the $2.50 Options, $5.00 Options, and any Additional Options that have
been granted but have not yet vested in accordance with their terms shall
vest as follows:
Percentage of
Time of Termination Options to Vest
------------------- ---------------
June 1, 1998 to May 31, 1999 25% of total
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June 1, 1999 to May 31, 2000 50% of total
June 1, 2000 to May 31, 2001 75% of total
June 1, 2001 to May 31, 2002 100% of total
10.5 In the event of termination of Executive's employment, the
Executive shall have the right for 180 days after such termination date to
sell any of Executive's shares of Common Stock, and the Company shall be
obligated to buy any of such shares of Common Stock, at the market price of
the Company's Common Stock. Executive agrees to grant the Company a right of
first refusal for a 30-day period to purchase any shares of Common Stock
owned by Executive offered to anyone other than the Company and agrees that
the Company has the right to assign its rights to purchase Executive's shares
pursuant to the terms hereof.
10.6 Any shares of Common Stock issued pursuant to the exercise of
stock options granted under the terms of this Section 10 shall bear a legend
indicating that such shares of Common Stock are subject to repurchase by the
Company, or its assignee, in accordance with the terms of this Agreement.
11. DISPUTE RESOLUTION
The parties agree that any dispute that may arise in connection with,
arising out of or relating to this Agreement, or any dispute that relates in
any way, in whole or in part, to Executive's employment with the Company, the
termination of that employment, or any other dispute by and among the parties
or their successors, assigns or affiliates, shall be submitted to binding
arbitration in Orange County, California according to the Employment Dispute
Resolution Rules and Procedures of the American Arbitration Association. This
arbitration obligation extends to any and all claims that may arise by and
between the parties or their successors, assigns or affiliates, and expressly
extends to, without limitation, claims or cause of action for wrongful
termination, impairment of ability to compete in the open labor market,
breach or an express or implied contract, breach of the covenant of good
faith and fair dealing, breach of fiduciary duty, fraud, misrepresentation,
defamation, slander, infliction of emotional distress, disability, loss of
future earnings, and claims under the applicable state constitution, the
United States Constitution, and applicable state fair employment laws,
federal equal employment opportunity laws, and federal and state labor
statutes and regulations, including, but not limited to, the Civil Rights Act
of 1964, as amended, the Labor-Management Relations Act, as amended, the
Worker Retraining and Notification Act of 1988, the Americans With
Disabilities Act of 1990, the Rehabilitation Act of 1973, as amended, the
Employee Retirement Income Security Act of 1974, as amended, the Age
Discrimination in Employment Act of 1967, as amended, and the California Fair
Employment and Housing Act, as amended.
12. ASSIGNMENT
This Agreement is a personal contract, and the rights, interests and
obligations of Executive hereunder may not be sold, transferred, assigned,
pledged or hypothecated except as otherwise expressly permitted by the
provisions of this Agreement. Executive shall not under any circumstances
have any option or right to require payment hereunder otherwise than in
accordance with the terms hereof. Except as otherwise expressly provided
herein, Executive shall not have any power of anticipation, alienation or
assignment of payments contemplated hereunder, and all rights and benefits of
Executive shall be for the sole personal benefit of Executive, and no other
person shall acquire any right, title or interest hereunder by reason of any
sale, assignment, transfer, claim or judgment or bankruptcy proceedings
against Executive; provided, however, that in the event of Executive's death,
Executive's estate, legal representatives or beneficiaries (as the case may
be) shall have the right to receive all of the benefits that accrued to
Executive pursuant to, and in accordance with, the terms of this Agreement.
13. SUCCESSOR
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This Agreement may be assigned by the Company to any successor interest to
its business. This Agreement shall bind and inure to the benefit of the
Company's successors and assigns as well.
14. NOTICES
All notices, requests and demands hereunder shall be in writing and
delivered by hand, by mail, or by telegram, and shall be deemed given if by hand
delivery, upon such delivery, and if by mail, 48 hours after deposit in the
United States mail, first class, registered or certified mail, postage prepaid
and properly addressed to the party at the address set forth at the beginning of
this Agreement. Any party may change its address for purposes of this paragraph
by giving the other party written notice of the new address in the manner set
forth above.
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15. INVALID PROVISIONS
Invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
16. AMENDMENT, MODIFICATION OR REVOCATION
This Agreement may be amended, modified or revoked in whole or in part, but
only by a written instrument which specifically refers to this Agreement and
expressly states that it constitutes an amendment, modification or revocation
hereof, as the case may be, and only if such written instrument has been signed
by each of the parties to this Agreement.
17. HEADINGS
The headings in this Agreement are inserted for convenience only and are
not to be considered in construction of the provisions hereof.
18. ENTIRE AGREEMENT
This Agreement contains the entire understanding among the parties and
supersedes any prior written or verbal agreements between them respecting the
subject matter hereof, including, without limitation, any prior verbal or
written employment agreement between Executive and the Company. Upon the
effectiveness hereof, any such prior verbal or written agreements shall
terminate.
No representations or warranties of any kind or nature relating to the
Company or its affiliates or their respective businesses, assets, liabilities,
operations, future plans or prospects have been made by or on behalf of the
Company to Executive; nor have any representations or warranties of any kind or
nature been made by Executive to the Company, except as expressly set forth in
this Agreement.
19. ATTORNEYS' FEES
If any legal action is necessary to enforce the terms and conditions of
this Agreement, the prevailing party in such action shall be entitled to recover
all costs of suit and reasonable attorneys' fees as determined by the
arbitrator.
20. FURTHER ASSURANCES
The parties shall execute such documents and take such other action as is
necessary or appropriate to effectuate the provisions of this Agreement.
21. CONTROLLING LAW
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This Agreement shall be governed by the laws of the State of Nevada.
22. WAIVER
A waiver by either party of any of the terms and conditions hereof shall
not be construed as a general waiver by such party, and such party shall be free
to reinstate such part or clause, with or without notice to the other party.
23. INDEMNIFICATION
To the fullest extent permitted by law and the Company's Certificate of
Incorporation and Bylaws, the Company shall indemnify, defend, and hold harmless
the Executive for all amounts (including, without limitation, judgments, fines,
settlement payments, losses, damages, costs and expenses, including reasonable
attorneys fees, incurred or paid by Executive in connection with any action,
proceeding, suit or investigation arising out of or relating to the performance
by Executive of services for, or acting as, an officer or employee of the
Company or any subsidiary thereof. The Company agrees to use its best efforts
to maintain directors' and officers' liability insurance, but the failure of the
Company to Maintain such insurance or any portion thereof shall not negate nor
diminish Company's obligations as set forth in this paragraph.
24. PERIODIC REVIEWS
During January of each year during the term hereof, the Board of Directors
of the Company shall review Executive's Annual Salary, bonus, stock options, and
additional benefits then being provided to Executive. Following each such
review, the Company may in its discretion increase the Annual Salary, bonus,
stock options, and benefits; however, the Company shall not decrease such items
during the period Executive serves as an employee of the Company. Prior to
February 28th of each year during the term hereof, the Board of Directors of the
Company shall communicate in writing the results of such review to Executive.
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IN WITNESS WHEREOF, the parties have entered into this Agreement on June
10, 1998.
THE COMPANY: EXECUTIVE:
PENNACO ENERGY, INC.
By:
-------------------------------- ------------------------------
Xxxxxxx X. Xxxxxx, President XXXX X. XXXX
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