RESTRICTED STOCK AGREEMENT
FOR
XXXXX X. XXXX
This RESTRICTED STOCK AGREEMENT (the "Agreement") is made and entered into
effective as of April 17, 2007 (the "Effective Date") by and between DUNE
ENERGY, INC., a Delaware corporation ("Company"), and XXXXX X. XXXX, an
individual resident in the State of Texas ("Xx. Xxxx").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its shareholders
to appoint Xx. Xxxx as the President and Chief Executive Officer of the Company
and to provide incentive to Xx. Xxxx to remain with the Company by making this
grant of common stock in accordance with the terms and subject to the conditions
provided in this Agreement;
NOW, THEREFORE, for and in consideration of the mutual premises, covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Award of Restricted Stock. The Board hereby grants to Xx. Xxxx, Three Million
(3,000,000) shares of common stock, par value $0.001 per share (the "Common
Stock"), of the Company (collectively the "Restricted Stock"), which shares are
and shall be subject to the terms, provisions and restrictions set forth in this
Agreement.
2. Cancellation of Restricted Stock. In the event that, on or prior to June 30,
2007, the Company shall not have completed its acquisition of all of the
outstanding capital stock of Goldking Energy Corporation ("Goldking"), pursuant
to the terms of that certain Stock Purchase Agreement dated effective April 17,
2007, then all shares of Restricted Stock granted to Xx. Xxxx hereunder shall be
automatically cancelled as of that date.
3. Right of First Refusal.
(a) Subject to the terms of this Section 3, Xx. Xxxx will not sell or
transfer for consideration, or offer to sell or transfer for consideration, in
one transaction or a series of related transactions, any Subject Shares (as
defined below) to any Person, without first offering such Subject Shares to the
Company on the terms and conditions set forth herein.
(b) Upon Xx. Xxxx proposing or receiving a bona fide offer that is subject
to Section 3(a) above, Xx. Xxxx shall promptly provide the Company with written
notice thereof. If, during the ten (10) Business Day period immediately
following the date that the Company receives such notice from Xx. Xxxx, (i) the
Company notifies Xx. Xxxx that it declines to accept such offer to purchase such
Subject Shares or (ii) the Company fails to notify Xx. Xxxx that it wishes to so
purchase such Subject Shares, then Xx. Xxxx may thereafter sell such Subject
Shares on the same terms and conditions as had been provided to the Company, at
any time on or before that date which is 180 days after the expiration of such
10 Business Day period. If such Subject Shares are not so sold during such
180-day period, the terms and conditions of this Section 3 shall be deemed to
automatically re-apply to such Subject Shares immediately following such 180-day
period.
(c) If (i) the Company notifies Xx. Xxxx that it intends to purchase the
offered Subject Shares and (ii) the Company is then legally permitted to
purchase the Subject Shares so offered in accordance with the laws of its state
of incorporation, the Company shall deliver full payment in cash for such
Subject Shares to Xx. Xxxx against delivery of the stock certificates for such
Subject Shares within five (5) Business Days following its giving of such notice
of acceptance to Xx. Xxxx. The purchase price per Subject Share to be paid by
the Company in payment therefor will be equal to (x) the price per Subject Share
offered to Xx. Xxxx by such third party, minus (y) $1.79 (the "First Refusal
Discount Amount"). In the event the shares of Common Stock of the Company are
subdivided into a greater number of shares of Common Stock, the First Refusal
Discount Amount in effect on the day upon which such subdivision becomes
effective shall be proportionately decreased, and conversely, in the event the
shares of Common Stock of the Company shall be combined into a smaller number of
shares of Common Stock, the First Refusal Discount Amount in effect on the day
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately upon the effectiveness of such subdivision or combination.
(d) For the purposes of this Agreement, (i) "Subject Shares" shall mean
the 3,000,000 shares of Common Stock acquired by Xx. Xxxx pursuant to Section 1,
plus any shares of Common Stock, other capital stock or any other security or
securities issued with respect thereto or in exchange therefor, in connection
with any stock dividend, stock split, reverse split, recapitalization or similar
corporate event involving the Common Stock, and (ii) "Business Day" shall mean
any day other than Saturday, Sunday or any other day on which banks are
authorized or required to be closed in the State of Texas.
(e) Nothing contained in this Section 3 shall be deemed to prohibit or
restrict any transfer or assignment of any of the Subject Shares (i) to the
Company, (ii) by way of gift, donation, bequest, descent or distribution or any
other transfer to a trust, limited partnership or pursuant to a will or any
other estate planning or estate administration process (provided that as a
condition to any such permitted transfer, the assignee of such Subject Shares
must expressly agree in writing to assume the restrictions against transfer and
the obligations of his or its assignor set forth in this Section 3 to the same
extent as such assignor), or (iii) by operation of law, court order or judicial
process. The restrictions contained in this Section 3 shall apply only to the
Subject Shares and shall not apply to any other shares of Common Stock or any
other securities of the Company that are held or beneficially owned by Xx. Xxxx
whatsoever, whether now owned, hereafter acquired or otherwise.
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4. Vesting of Restricted Stock.
(a) Except as otherwise provided in Sections 4(b), 4(c), 4(d) and 6
hereof, the shares of Restricted Stock shall become vested in the following
percentages and at the following times, provided that the Continuous Service (as
defined in Section 4(d)(iii) below) of Xx. Xxxx continues through and on the
applicable Vesting Date:
Percentage of Shares Vesting Date
-------------------- ------------
33 1/3% First anniversary of the Effective Date
33 1/3% Second anniversary of the Effective Date
33 1/3% Third anniversary of the Effective Date
There shall be no proportionate or partial vesting of shares of Restricted Stock
in or during the months, days or periods prior to each of the respective Vesting
Dates, and all vesting of shares of Restricted Stock shall occur only on the
respective Vesting Dates. Upon the termination or cessation of Xx. Xxxx'x
Continuous Service, any portion of the Restricted Stock that is not yet then
vested, and which does not then become vested pursuant to this Section 4, shall
be subject to re-purchase by the Company from Xx. Xxxx as provided in Section 6,
below.
(b) Notwithstanding any other term or provision of this Agreement, in the
event that (i) a "Change in Control" (as defined in Section 4(e)(i) below) of
the Company occurs during Xx. Xxxx'x Continuous Service, or (ii) Watt's
Continuous Service is terminated by the Company without cause (as defined in
that employment agreement of even date herewith between Xx. Xxxx and the
Company), the shares of Restricted Stock subject to this Agreement shall become
immediately vested as of the date of the Change in Control or such termination
without cause.
(c) Notwithstanding any other term or provision of this Agreement, the
Board shall be authorized, in its sole discretion, based upon its review and
evaluation of the performance of Xx. Xxxx and of the Company, to accelerate the
vesting of any shares of Restricted Stock under this Agreement, at such times
and upon such terms and conditions as the Board shall deem advisable.
(d) For purposes of this Agreement, the following terms shall have the
meanings indicated:
(i) "Change in Control" shall mean any of the following events:
(1) a merger of consolidation to which the Company is a p arty
if the individuals and entities who were stockholders of the Company immediately
prior to the effective date of such merger or consolidation have beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of less than 50% of
the total combined voting power for election of directors of the surviving
corporation following the effective date of such merger or consolidation;
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(2) the acquisition or holding of direct or indirect
beneficial ownership (as defined under Rule 13d-3 of the Exchange Act) of
securities of the Company representing in the aggregate 30% or more of the total
combined voting power of the Company's then issued and outstanding voting
securities by any person, entity or group of associated persons or entities
acting in concert, other than any employee benefit plan of the Company or of any
subsidiary of the Company, or any entity holding such securities for or pursuant
to the terms of any such plan;
(3) the sale of all or substantially all of the assets of the
Company to any person or entity that is not a wholly-owned subsidiary of the
Company; or
(4) the approval by the stockholders of the Company of any
plan or proposal for the liquidation of the Company or its material
subsidiaries, other than into the Company.
(ii) "Continuous Service" shall mean the continuous service to the
Company or a Related Entity, without interruption, of Xx. Xxxx, in Xx. Xxxx'x
capacity as the President and Chief Executive Officer of the Company or of any
Related Entity. Continuous Service shall not be considered interrupted (or to
have ceased or terminated) in the case of (1) any approved leave of absence, (2)
transfers among the Company, any Related Entity, or any successor thereto, so
long as Xx. Xxxx continues in his capacity as the President and Chief Executive
Officer thereof, or (3) any change in status (e.g., from President and Chief
Executive Officer to Vice-President), if and so long as (x) Xx. Xxxx remains in
the service of the Company or a Related Entity in the capacity of President and
Chief Executive Officer (except as otherwise provided herein), and (y) which
change in status is approved in writing by the Company or a Related Entity in
its sole discretion (with an express acknowledgement that such change in status
continues, and does not cease or terminate, "Continuous Service" for purposes of
this Agreement). An approved leave of absence shall include sick leave or any
other authorized personal leave approved by the Company in writing.
(iii) "Non-Vested Shares" means any portion of the Restricted Stock
subject to this Agreement that has not become vested pursuant to this Section 4.
(iv) "Related Entity" shall mean any Subsidiary, and any business,
corporation, partnership, limited liability company, trust or other entity in
which the Company or a Subsidiary holds a substantial ownership interest,
directly or indirectly.
(v) "Subsidiary" shall mean any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities or interests of
such corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.
(vi) "Vested Shares" shall mean any portion of the Restricted Stock
subject to this Agreement that is and has become vested pursuant to this Section
4.
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5. Delivery of Restricted Stock.
(a) One or more stock certificates evidencing the Restricted Stock shall
be issued in the name of Xx. Xxxx but shall be held and retained by the
Secretary of the Company until the latest date on which the shares subject to
this Restricted Stock award become Vested Shares pursuant to Section 4 hereof
(the "Applicable Date"). All such stock certificates shall bear the following
legends, along with such other legends that the Board shall deem necessary and
appropriate or which are otherwise required or indicated pursuant to any
applicable stockholders agreement:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER
THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION UNDER THE 1933 ACT AND
SUCH OTHER APPLICABLE LAWS (AS APPLICABLE) IS IN EFFECT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND LAWS AS CONFIRMED TO THE
ISSUER BY AN OPINION (IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER) OF
COUNSEL (SATISFACTORY TO THE ISSUER).
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO SUBSTANTIAL
VESTING AND OTHER RESTRICTIONS AS SET FORTH IN THE RESTRICTED STOCK
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THE SHARES, A COPY
OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES, AND INCLUDE
VESTING CONDITIONS WHICH MAY RESULT IN THE COMPLETE FORFEITURE OF THE
SHARES.
(b) Xx. Xxxx shall deposit with the Company stock powers or other
instruments of transfer or assignment, duly endorsed in blank with signature(s)
guaranteed, corresponding to each certificate representing shares of Restricted
Stock until such shares become Vested Shares. If Xx. Xxxx shall fail to provide
the Company with any such stock power or other instrument of transfer or
assignment, Xx. Xxxx hereby irrevocably appoints the Secretary of the Company as
his attorney-in-fact, with full power of appointment and substitution, to
execute and deliver any such power or other instrument which may be necessary to
effectuate the transfer of the Restricted Stock (or assignment of distributions
thereon) on the books and records of the Company.
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(c) On the Applicable Date (as defined in Section 5(a) above) or as soon
as administratively practicable thereafter, the Company shall promptly cause a
new certificate or certificates to be issued for and with respect to all Vested
Shares and shall deliver the new certificate or certificates, to Xx. Xxxx. The
new certificate or certificates shall continue to bear those legends and
endorsements that the Company shall deem necessary or appropriate (including
those relating to restrictions on transferability and/or obligations and
restrictions under the Securities Laws).
6. Termination or Cessation of Continuous Service. Upon the termination or
cessation of Xx. Xxxx'x Continuous Service, any portion of the Restricted Stock
that is not yet then vested, and which does not then become vested pursuant to
Section 4, shall be subject to re-purchase by the Company from Xx. Xxxx, and Xx.
Xxxx shall sell to the Company upon the exercise of such right by the Company,
at a purchase price per share of $0.01, the number of shares of Restricted Stock
(rounded up to the nearest whole share) not yet then vested. The number of
shares of Xx. Xxxx'x Shares subject to repurchase, at the time of any stock
dividend or other distribution made on or in respect of Xx. Xxxx'x Shares or any
subdivision, combination, redemption or reclassification of the outstanding
capital stock of the Company or received in exchange for Xx. Xxxx'x Shares or
any part thereof, shall be adjusted to give effect to such stock dividend, other
distribution, subdivision, combination, redemption or reclassification. The
Board shall have the power and authority to enforce on behalf of the Company any
and all rights of the Company under this Agreement in the event of Xx. Xxxx'x
forfeiture of Non-Vested Shares pursuant to this Section 6.
7. Taxes; Gross-Up Amount.
(a) Xx. Xxxx shall, within thirty (30) days of the Effective Date, make an
election to be taxed at the Effective Date, as the time of the grant to him of
the Restricted Stock, pursuant to Section 83(b) of the Internal Revenue Code of
1986, as amended (the "83(b) election"), whereby for tax purposes Xx. Xxxx'x
basis in the Restricted Stock, whether Vested Shares or Non-Vested Shares, shall
be set at the fair market value at the Effective Date, less the First Refusal
Discount Amount.
(b) Xx. Xxxx shall be responsible for all Federal tax imposed on him under
the Internal Revenue Code of 1986, as amended (the "Code"), and any state or
local tax code or regulations, if applicable, together with any interest or
penalties incurred by Executive with respect to any such taxes (collectively,
the "Taxes"), as a result of being awarded the Restricted Stock (the "Restricted
Stock Award"); provided, however, if Xx. Xxxx timely files a valid 83(b)
election with respect to the Restricted Stock Award, then the Company shall pay
to Xx. Xxxx, and Xx. Xxxx shall be entitled to receive from the Company, an
additional payment (the "Gross-Up Payment") equal to all applicable Taxes (other
than interest and penalties due to Xx. Xxxx'x failure to timely make a valid
83(b) election, file a tax return or pay taxes shown on his return), if any,
imposed by reason of the Restricted Stock Award and the payment of the Gross-Up
Payment. Any Gross-Up Payment shall be payable by the Company to or for the
benefit of Executive no later than April 1st of the year following the year in
which the income was earned.
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8. Rights with Respect to Restricted Stock.
(a) Except as otherwise provided in this Agreement, Xx. Xxxx shall have,
with respect to all of the shares of Restricted Stock, whether Vested Shares or
Non-Vested Shares, all of the rights of a holder of shares of common stock of
the Company, including without limitation (i) the right to vote such Restricted
Stock, (ii) the right to receive cash dividends, if any, as may be declared on
the Restricted Stock from time to time, and (iii) the rights available to all
holders of shares of common stock of the Company upon any merger, consolidation,
reorganization, liquidation or dissolution, stock split-up, stock dividend or
recapitalization undertaken by the Company; provided, however, that all of such
rights shall be subject to the terms, provisions, conditions and restrictions
set forth in this Agreement (including without limitation conditions under which
all such rights shall be forfeited).
(b) Notwithstanding any term or provision of this Agreement to the
contrary, the existence of this Agreement, or of any outstanding Restricted
Stock awarded hereunder, shall not affect in any manner the right, power or
authority of the Company to make, authorize or consummate: (i) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger, consolidation or
similar transaction by or of the Company; (iii) any offer, issue or sale by the
Company of any capital stock of the Company, including any equity or debt
securities, or preferred or preference stock that would rank prior to or on
parity with the Restricted Stock and/or that would include, have or possess
other rights, benefits and/or preferences superior to those that the Restricted
Stock includes, has or possesses, or any warrants, options or rights with
respect to any of the foregoing; (iv) the dissolution or liquidation of the
Company; (v) any sale, transfer or assignment of all or any part of the stock,
assets or business of the Company; or (vi) any other corporate transaction, act
or proceeding (whether of a similar character or otherwise).
9. Transferability. The shares of Restricted Stock are not transferable until
and unless they become Vested Shares in accordance with this Agreement. The
terms of this Agreement shall be binding upon the executors, administrators,
heirs, successors and assigns of Xx. Xxxx. Any attempt to effect a Transfer of
any shares of Restricted Stock prior to the date on which the shares become
Vested Shares shall be void ab initio. For purposes of this Agreement,
"Transfer" shall mean any sale, transfer, encumbrance, gift, donation,
assignment, pledge, hypothecation, or other disposition, whether similar or
dissimilar to those previously enumerated, whether voluntary or involuntary, and
including, but not limited to, any disposition by operation of law, by court
order, by judicial process, or by foreclosure, levy or attachment.
Notwithstanding the foregoing, the shares of restricted Stock may be Transferred
to any member of Xx. Xxxx'x immediate family, to any trust or other entity of
which Xx. Xxxx and members of his family are the sole beneficiaries or the
beneficial holders of all equity interests. Any shares of Restricted Stock
transferred pursuant to the immediately preceding sentence shall remain subject
to the right of repurchase in favor of the Company provided for of Section 6
hereof.
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10. Amendment, Modification & Assignment; Non-Transferability. This Agreement
may only be modified or amended in a writing signed by the parties hereto. No
promises, assurances, commitments, agreements, undertakings or representations,
whether oral, written, electronic or otherwise, and whether express or implied,
with respect to the subject matter hereof, have been made by either party which
are not set forth expressly in this Agreement. Unless otherwise consented to in
writing by the Company, in its sole discretion, this Agreement (and Xx. Xxxx'x
rights hereunder) may not be assigned by Xx. Xxxx, and the obligations of Xx.
Xxxx hereunder may not be delegated, in whole or in part. The rights and
obligations created hereunder shall be binding on Xx. Xxxx and his heirs and
legal representatives and on the successors and assigns of the Company.
11. Complete Agreement. This Agreement (together with those agreements and
documents expressly referred to herein, for the purposes referred to herein)
embody the complete and entire agreement and understanding between the parties
with respect to the subject matter hereof, and supersede any and all prior
promises, assurances, commitments, agreements, undertakings or representations,
whether oral, written, electronic or otherwise, and whether express or implied,
which may relate to the subject matter hereof in any way. 12. Miscellaneous.
(a) No Right to Continued Employment or Service. This Agreement and the
grant of Restricted Stock hereunder shall not confer, or be construed to confer,
upon Xx. Xxxx any right to employment or service, or continued employment or
service, with the Company or any Related Entity.
(b) No Limit on Other Compensation Arrangements. Nothing contained in this
Agreement shall preclude the Company or any Related Entity from adopting or
continuing in effect other or additional compensation plans, agreements or
arrangements, and any such plans, agreements and arrangements may be either
generally applicable or applicable only in specific cases or to specific
persons.
(c) Severability. If any term or provision of this Agreement is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
under any applicable law, rule or regulation, then such provision shall be
construed or deemed amended to conform to applicable law (or if such provision
cannot be so construed or deemed amended without materially altering the purpose
or intent of this Agreement and the grant of Restricted Stock hereunder, such
provision shall be stricken as to such jurisdiction and the remainder of this
Agreement and the award hereunder shall remain in full force and effect).
(d) No Trust or Fund Created. Neither this Agreement nor the grant of
Restricted Stock hereunder shall create or be construed to create a trust or
separate fund of any kind or a fiduciary relationship between the Company or any
Related Entity and Xx. Xxxx or any other person. To the extent that Xx. Xxxx or
any other person acquires a right to receive payments from the Company pursuant
to this Agreement, such right shall be no greater than the right of any
unsecured general creditor of the Company.
(e) Law Governing. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware (without
reference to the conflict of laws rules or principles thereof).
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(f) Interpretation. Xx. Xxxx accepts the Restricted Stock subject to all
of the terms, provisions and restrictions of this Agreement. The undersigned Xx.
Xxxx hereby accepts as binding, conclusive and final all decisions or
interpretations of the Board upon any questions arising under this Agreement.
(g) Headings. Section, paragraph and other headings and captions are
provided solely as a convenience to facilitate reference. Such headings and
captions shall not be deemed in any way material or relevant to the
construction, meaning or interpretation of this Agreement or any term or
provision hereof.
(h) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by air courier or first class certified or registered mail, return
receipt requested and postage prepaid, addressed as follows:
If to Xx. Xxxx, to: to his address on file with the Company
If to the Company, to: Dune Energy, Inc.
0000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000
Attn: Chairman
with a copy to: Xxxxx & Xxx Xxxxxx
0 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of delivery if
personally delivered; on the business day after the date when sent if sent by
air courier; and on the third business day after the date when sent if sent by
mail, in each case addressed to such party as provided in this Section or in
accordance with the latest written direction from such party.
(i) Non-Waiver of Breach. The waiver by any party hereto of the other
party's prompt and complete performance, or breach or violation, of any term or
provision of this Agreement shall be effected solely in a writing signed by such
party, and shall not operate nor be construed as a waiver of any subsequent
breach or violation, and the waiver by any party hereto to exercise any right or
remedy which he or it may possess shall not operate nor be construed as the
waiver of such right or remedy by such party, or as a bar to the exercise of
such right or remedy by such party, upon the occurrence of any subsequent breach
or violation.
(j) Counterparts. This Agreement may be executed in two or more separate
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have executed this Agreement as of the date first written above.
DUNE ENERGY, INC.
By: /s/ Xxxx Xxxxxx
---------------------
Name: Xxxx Xxxxxx
Title: Chairman
AGREED AND ACCEPTED:
XXXXX X. XXXX:
/s/ Xxxxx X. Xxxx
--------------------------
Xxxxx X. Xxxx
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