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EXHIBIT 10(kk)
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT ("AGREEMENT") is made and entered
into to be effective November 16, 1998 ("EFFECTIVE DATE"), by and between SOUTH
TEXAS DRILLING & EXPLORATION, INC. (together with its successors, "COMPANY") and
XXXXXXX X. XXXXXX ("EXECUTIVE").
RECITAL
The Company desires to employ Executive, and Executive desires to be
employed by the Company, pursuant to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Agreement, Executive and the Company agree as follows:
1. RESPONSIBILITIES:
a. Executive and Company acknowledge and agree that Executive shall be
employed as Chief Executive Officer and Chairman of the Board of the Company.
Executive agrees that he will devote his reasonable best efforts and such
portion of his time, attention and skill to the business of the Company as is
necessary to perform his obligations under this Agreement.
b. Executive acknowledges and agrees that, as Chief Executive Officer
and Chairman of the Board of the Company, he shall be responsible for actively
supervising the overall management of the Company and its subsidiaries, subject
to and in accordance with the authority and direction of the Board of Directors
of the Company ("BOARD OF DIRECTORS").
2. COMPENSATION: During his employment pursuant to this Agreement, the
Company agrees to provide Executive the following compensation:
a. BASE SALARY: Executive shall be paid an annual salary ("ANNUAL BASE
SALARY") of $40,000 for the first year of the Initial Term (as herein defined)
of Executive's employment with the Company. For the second year of the Initial
Term of Executive's employment, and for each year afterwards, Executive shall be
paid an Annual Base Salary which will be reasonably determined by Executive and
the Company; provided, however, that for each term after the Initial Term, the
Annual Base Salary shall be no less than $40,000. Such salary shall be subject
to withholding for the prescribed federal income tax, social security and other
items as required by law and for other items consistent with the Company's
policy with respect to health insurance and other benefit plans for similarly
situated employees.
b. BUSINESS EXPENSES: The Company shall reimburse all reasonable travel
and entertainment expenses incurred by Executive in connection with the
performance of his duties pursuant to this Agreement. Executive shall provide
the Company with a written accounting of
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his expenses on a form which satisfies applicable federal income tax reporting
or record keeping requirements. The Company shall also reimburse all reasonable
automobile expenses, as per the standard policy for executives of the Company,
as such policy may be amended from time to time by the Company.
c. DISCRETIONARY INCENTIVE BONUS: Executive may from time to time be
awarded a discretionary incentive bonus, as determined by the Board of
Directors of the Company, during the term of his employment under this
Agreement. This bonus shall be based on the financial performance of the
Company and shall be consistent with the incentive bonuses paid to other
executives of the Company.
d. EMPLOYEE BENEFITS: During the term of this Agreement, Executive shall
be entitled to receive and/or participate in such benefits, including vacation,
sick leave, health insurance, life insurance, disability insurance and
retirement benefits as are made available to other executives of the Company.
3. TERM AND TERMINATION: The duration of this Agreement shall be defined and
determined as follows:
a. INITIAL TERM: This Agreement shall continue in full force and effect
for two (2) years ("INITIAL TERM"), commencing on the Effective Date and
expiring on November 15, 2000, ("EXPIRATION DATE"), unless terminated prior to
the Expiration Date in accordance with this Agreement.
b. RENEWAL: Upon the Expiration Date, this Agreement shall renew
automatically for additional one-year terms unless either party notifies the
other party within thirty (30) days of the end of the Initial Term, or any
additional one-year term, of his or its intent to terminate the Agreement upon
the expiration of the then-current term.
c. TERMINATION: Upon termination of this Agreement for any reason, the
Company shall pay to Executive any and all Annual Base Salary and accrued
benefits due Executive through the date of termination. This Agreement may be
terminated as follows:
(1) DEATH: In the event of Executive's death, this Agreement shall
terminate immediately, without notice, on the date of Executive's death;
provided, however, that, in addition to the payment of any and all Annual Base
Salary and accrued benefits due Executive through the date of termination, the
Company shall also pay to Executive's estate the Annual Base Salary that
Executive would have earned for a period of ninety (90) days following the date
of death and a pro rata amount of the discretionary incentive bonus, if any,
paid to Executive for the prior contract year, in the time and manner in which
Executive would have been paid such compensation. In addition, Executive's
designated beneficiaries shall be entitled to receive any life insurance
benefits provided to Executive in accordance with the applicable plan documents
and/or insurance policies governing such benefits.
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(2) DISABILITY: In the event Executive becomes physically or
mentally disabled so that he is unable to perform the essential functions of
his position, with reasonable accommodation, for a period of one hundred eighty
(180) consecutive days, this Agreement shall terminate immediately, without
notice.
(3) WITH GOOD CAUSE:
(a) This Agreement may be terminated by the Company providing
thirty (30) days prior written notice to Executive that the Company is
terminating the Agreement with good cause ("WITH GOOD CAUSE") at any time during
his employment. In the event that With Good Cause exists for terminating this
Agreement, the Company may elect to provide Executive with thirty (30) days pay
in lieu of notice, in addition to any other amounts due under this Agreement.
(b) For purposes of this Agreement, With Good Cause shall be
defined as follows: (i) conviction of any act or omission constituting fraud
under the law of the State of Texas; (ii) conviction of, or a plea of nolo
contendere to, a felony; (iii) embezzlement or theft of Company property or
funds; or (iv) failure of Executive to follow the instructions of the Board of
Directors as approved by a majority of the Board members at a meeting of the
Board of Directors.
(c) In the event the Company believes With Good Cause exists
for terminating this Agreement pursuant to this section, the Company shall be
required to first give Executive written notice of the acts or omissions
constituting With Good Cause, and no notice of termination With Good Cause shall
be communicated by the Company unless and until Executive fails to cure such
acts or omissions (to the extent such acts or omissions can be cured) within
fifteen (15) days after receipt of the notice stating the acts or omissions
constituting With Good Cause.
(d) In the event the Company communicates a notice stating
Executive's acts or omissions constituting With Good Cause pursuant to this
section, Executive shall have the right to a hearing before the Board of
Directors, within fifteen (15) days after the date the notice stating
Executive's acts or omissions constituting With Good Cause is received, to
contest the alleged With Good Cause stated in the notice.
(4) WITHOUT GOOD CAUSE:
(a) This Agreement shall terminate by the Company providing
thirty (30) days written notice to Executive that the Company is terminating
the Agreement without good cause ("WITHOUT GOOD CAUSE"), at any time during his
employment; provided, however, that the Company shall be required to pay
severance in accordance with the severance provisions in Section 4.
(b) Any termination of this Agreement by the company which is
not With Good Cause, or which does not result from the death of Executive,
or the disability of
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Executive, shall be deemed to be a termination Without Good Cause. Furthermore,
in the event that the Company communicates a notice of termination With Good
Cause, and a third party finder of fact determine that no Good Cause exists or
existed for the notice of termination With Good Cause to be communicated by the
Company to Executive, then such notice shall be deemed to have been a
communication of a notice of termination Without Good Cause, as appropriate,
for all purposes under this Agreement.
(5) RESIGNATION: Executive shall be entitled to terminate this
Agreement by providing the Company with a written notice of resignation at
least thirty (30) days prior to his intended resignation date, subject to the
following provisions:
(a) WITH GOOD REASON: Executive shall have the right to resign
with good reason ("WITH GOOD REASON"). With Good Reason shall be defined as,
(i) the Company's failure in any material respect to perform any provision of
this Agreement; (ii) any material changes in the duties and responsibilities of
Executive under this Agreement without the written consent of Executive; (iii)
the hiring or promotion by the Company of another executive employee to a
position of equal or greater responsibility of the management of the Company
without the written consent of Executive; (iv) the Company's directing
Executive to work at a location other than San Antonio, Texas; (v) after a
Change of Control (as defined in EXHIBIT A), any material change which, in the
sole but reasonable discretion of Executive, impacts detrimentally upon
Executive's position within the Company.
(b) WITHOUT GOOD REASON: Any resignation by Executive for any
reason other than With Good Reason, as defined above, shall be deemed to be a
resignation without good reason ("WITHOUT GOOD REASON").
4. SEVERANCE: Upon termination by the Company Without Good Cause, or upon a
termination by Executive With Good Reason, the Company shall pay to Executive,
as severance pay ("SEVERANCE PAY"), the greater of (i) $40,000, and (ii) the
total remaining Annual Base Salary due Executive for the entire remaining term
of the Initial Term of the Agreement. By way of example only, if the Company
terminated Executive Without Good Cause on December 16, 1998, the Company
would pay Executive $76,666.67 as Severance Pay. The Severance Pay shall be
paid to Executive in one lump sum, minus any required statutory payroll
deductions, within five (5) days of termination of Executive's employment
relationship with the Company. The Severance Pay specified in this section
shall be in addition to the payment of any and all unpaid Annual Base Salary
and accrued benefits due Executive through the date of termination.
5. STOCK OPTIONS: The Company hereby grants Executive the right to purchase
100,000 shares of common stock of the Company, at a purchase price of $0.75 per
share. Executive's right to purchase this 100,000 shares of common stock shall
automatically expire on April 1, 1999. Executive shall have the right to
purchase some or all of such 100,000 shares of common stock, in Executive's
sole discretion. The Company shall also grant Executive options pursuant to an
incentive stock option plan maintained by the Company to purchase 650,000 shares
of the Company's common stock ("OPTION STOCK") at $0.75 per share. Executive's
options shall vest at a rate of 20% per year (i.e., 130,000 shares per year)
for each 12-month period Executive is
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employed by the Company. Upon resignation for Good Reason by Executive or
termination Without Good Cause by the Company, all of Executive's options shall
vest automatically upon the date of termination of Executive's employment. Upon
resignation without Good Reason by Executive or termination With Cause by the
Company, all of Executive's now vested options shall terminate automatically
upon the date of termination of Executive's employment. Furthermore, the
parties acknowledge that Executive has agreed to assume the position of Chief
Executive Officer and Chairman of the Board and to enter into this Agreement
based upon his confidence in the current shareholders of the Company and the
support of the Board of Directors for the development of a new strategy for the
Company. Accordingly, if the Company should undergo a Change of Control, all
stock options then held by Executive for the purchase of equity securities of
the Company shall immediately become vested, effective on the date of the
Change of Control. Executive shall have the right to exercise any option to
purchase part of the Option Stock granted to him by the Company after such
option has vested in accordance with the vesting provisions set forth in the
option agreement reflecting the grant of options by the Company.
6. SUCCESSORS AND ASSIGNS: The parties acknowledge and agree that this
Agreement may not be assigned by either party without the written consent of
the other party. In the event of a Change of Control, the Company's obligations
under this Agreement shall be assumed by the person or entity that survives
such transaction, or by the person purchasing assets constituting such Change
of Control. In the event of Executive's death, this Agreement shall be
enforceable by Executive's estate, executors or legal representatives, but
only to the extent that such persons may collect any compensation (including
through the exercise of stock options) due to Executive under this Agreement.
7. INDEMNIFICATION: During and after the employment of Executive pursuant to
this Agreement, the Company shall indemnify Executive against all judgments,
penalties, fines, assessments, losses, amounts paid in settlement and
reasonable expenses (including, but not limited to, attorneys' fees) for which
Executive may become liable as a result of his performance of his duties and
responsibilities pursuant to this Agreement, to the fullest extent permissible
under the laws of the State of Texas. This provision shall be in addition to
any other provisions of the Company's Articles of Incorporation, Bylaws or
Indemnification Agreements providing for indemnification to Executive.
8. RULES OF CONSTRUCTION: The following provisions shall govern the
interpretation and enforcement of this Agreement:
a. SEVERABILITY: The parties acknowledge and agree that each provision
of this Agreement shall be enforceable independently of every other provision.
Furthermore, the parties acknowledge and agree that, in the event any provision
of this Agreement is determined to be unenforceable for any reason, the
remaining covenants and/or provisions will remain effective, binding and
enforceable.
b. WAIVER: The parties acknowledge and agree that the failure of either
to enforce any provision of this Agreement shall not constitute a waiver of
that particular provision, or of any other provisions, of this Agreement.
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c. CHOICE OF LAW/VENUE: The parties acknowledge and agree that except
as specifically provided otherwise in this Agreement, the law of Texas will
govern the validity, interpretation and effect of this Agreement and any other
dispute relating to, or arising out of, the employment relationship between the
Company and Executive. Proper venue for any litigation or arbitration concerning
this Agreement shall be in San Antonio, Texas.
d. MODIFICATION: The parties acknowledge and agree that this Agreement
constitutes the complete and entire agreement between the parties; that the
parties have executed this Agreement based upon the express terms and provisions
set forth herein; that the parties have not relied on any representations, oral
or written, which are not set forth in this Agreement; that no previous
agreement, either oral or written, shall have any effect on the terms or
provisions of this Agreement; and that all previous agreements, either oral or
written, are expressly superseded and revoked by this Agreement. In addition,
the parties acknowledge and agree that the provisions of this Agreement may not
be modified by any subsequent agreement unless the modifying agreement (i) is in
writing (ii) contains an express provision referencing this Agreement (iii) is
signed by Executive and (iv) is approved by the Board of Directors.
e. EXECUTION: The parties agree that this Agreement may be executed in
multiple counterparts, each of which shall be deemed an original for all
purposes.
f. HEADINGS: The parties agree that the subject headings set forth at
the beginning of each section in this Agreement are provided for ease of
reference only, and shall not be utilized for any purpose in connection with the
construction, interpretation or enforcement of this Agreement.
9. LEGAL CONSULTATION: The parties acknowledge and agree that both parties have
been accorded a reasonable opportunity to review this Agreement with legal
counsel prior to executing the agreement.
10. NOTICES: The parties acknowledge and agree that any and all Notices
required to be delivered under the terms of this Agreement shall be forwarded
by personal delivery or certified U.S. mail. Notices shall be deemed to be
communicated and effective on the day of receipt. Such Notices shall be
addressed to each party as follows:
XXXXXXX X. XXXXXX
/s/ XXXXXXX X. XXXXXX
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SOUTH TEXAS DRILLING & EXPLORATION, INC.
0000 Xxxxxxxx Xxxxxxxx X
Xxx Xxxxxxx, Xxxxx 00000
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With a copy to:
X. Xxxxxxx Xxxx, Esq.
Jenkens & Xxxxxxxxx,
A Professional Corporation
2200 One American Center
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Any party hereto may change its or his address for the purpose of receiving
notices and other communications as herein provided by a written notice given in
the manner aforesaid to the other party or parties hereto.
EXECUTED on this 31st day of March, 1999, to be effective as of the
16th day of November, 1998.
Dated: March 31, 1999 XXXXXXX X. XXXXXX
/s/ XXXXXXX X. XXXXXX
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DATED: March 31, 0000 XXXXX XXXXX DRILLING & EXPLORATION,
INC.
/s/ XXXXXXX X. XXXXXXXX
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Xxxxxxx X. Xxxxxxxx
/s/ XXXXXX X. XXXXX
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Xxxxxx X. Xxxxx
/s/ WM. XXXXX XXXXX
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Wm. Xxxxx Xxxxx
/s/ XXXXXXX XXXXXXXX
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Xxxxxxx Xxxxxxxx
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EXHIBIT A
DEFINITION OF CHANGE OF CONTROL
A Change of Control shall mean:
(1) a change in the ownership of the capital stock of the Company
where a corporation, person or group acting in concert ("PERSON") as described
in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended
("EXCHANGE ACT"), holds or acquires, directly or indirectly, beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of a number of shares of capital stock of the Company which constitutes 50% or
more of the combined voting power of the Company's then outstanding capital
stock then entitled to vote generally in the election of directors. If a Person
were the beneficial owner of 50% or more of the combined voting power of the
Company's then outstanding securities as of the Effective Date and such Person
thereafter accumulates more than 5% of additional voting power, a Change of
Control of the Company shall be deemed to have occurred, notwithstanding
anything in this Exhibit to the contrary; or
(2) the persons who were members of the Board of Directors
immediately prior to a tender offer, exchange offer, contested election or any
combination of the foregoing, cease to constitute a majority of the Board of
Directors of the Company; or
(3) a dissolution of the Company, or the adoption by the Company of
a plan of liquidation, or the adoption by the Company of a merger,
consolidation or reorganization involving the Company in which the Company is
not the surviving entity, or a sale of all or substantially all of the assets
of the Company (for purposes of this Agreement, a sale of all or substantially
all of the assets of the Company shall be deemed to occur if any Person
acquires, or during the 12-month period ending on the date of the most recent
acquisition by such Person, has acquired, gross assets of the Company that have
an aggregate fair market value equal to 50% or more of the fair market value of
all of the gross assets of the Company immediately prior to such acquisition or
acquisitions); or
(4) a tender offer or exchange offer is made by any Person which, if
successfully completed, would result in such Person beneficially owning (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) either 50% or
more of the Company's outstanding shares of Common Stock or shares of capital
stock having 50% or more of the combined voting power of the Company's then
outstanding capital stock (other than an offer made by the Company), and
sufficient shares are acquired under the offer to cause such person to own 50%
or more of the voting power; or
(5) a change in control is reported or is required to be reported by
the Company in response to either Item 6(e) of Schedule 14A of Regulations 14A
promulgated under the Exchange Act or Item 1 of Form 8-K promulgated under the
Exchange Act; or
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(6) during any period of two consecutive years, individuals
who, at the beginning of such period constituted the entire Board of Directors
of the Company, cease for any reason (other than death) to constitute a majority
of the directors, unless the election, or the nomination for election, by the
Company's stockholders, of each new director was approved by a vote of at least
a majority of the directors then still in office who were directors at the
beginning of the period.
A Change of Control shall include any other transactions or series of
related transactions occurring which have substantially the same effect as the
transactions specified in any of the preceding clauses of Section 4(a)(1)-(6).
However, a Change of Control shall not be deemed to occur if a Person becomes
the beneficial owner of the applicable percentage or more (as referenced above)
of the combined voting power of the Company's then outstanding securities solely
by reason of the Company's redemption or repurchase of securities; but further
acquisitions by such Person that cause such Person to be the beneficial owner of
the applicable percentage or more (as referenced above) of the combined voting
power of the Company's then outstanding securities shall be deemed a Change of
Control.
Notwithstanding any other provision of this definition of "Change of
Control," a Change of Control shall not be deemed to have occurred as a result
of Executive's acceptance of one or more of the signed resignation letters of
the members of the Board of Directors in Executive's possession as of the date
of execution of this Agreement by Executive.
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