1
EXHIBIT 10.20
XXXXXX OIL AND GAS COMPANY
EMPLOYMENT AGREEMENT
FOR
XXXXX X. XXXX
This Employment Agreement (the "Agreement") is entered into as of July
10, 2000 by XXXXXX OIL AND GAS COMPANY, a Delaware corporation ("Company") and
XXXXX X. XXXX ("Employee").
In consideration of the promises below, the parties agree as follows.
1. Title. Employee shall hold the title of President and Chief
Executive Officer.
2. Duties.
2.1. General Duties. Employee shall undertake and render
services as may from time to time be assigned to him by the Board of
Directors. The duties shall be reasonably consistent with Employee's
experiences and shall include implementing the business plan developed
from time to time by the Board and Employee. Employee shall have the
responsibility of directing and supervising all of the activities of
the Company both new and recurring, in its normal course of business.
2.2. Outside Activities. Employee shall devote his full time
to the performance of his duties, and agrees that his first duty of
loyalty is to Company. Except with the express written consent of the
Board of Directors, Employee shall not, directly or indirectly, alone
or as a member of any partnership, or as an officer, director or
employee of any other corporation, partnership or other organization,
be actively engaged in any other duties or pursuits which interfere or
compete with the performance of his duties under this Agreement.
3. Term. This Agreement shall commence on July 10, 2000 and continue in
force until July 9, 2003 (the "Employment Period") unless sooner terminated by
either party pursuant to Section 5.
4. Compensation. As payment in full for services rendered to Company,
Employee shall be entitled to receive from Company, and Company shall pay to
Employee, salary and benefits as follows.
4.1. Salary. Company shall initially pay to Employee base
salary at a rate of $350,000 per annum ("Base Salary") payable
bi-weekly or at such other time or times as Company may allow or
provide to other similarly situated employees in accordance with
policies adopted from time to time by the Board of Directors. Base
Salary for any partial period of employment shall be prorated. All
compensation shall be subject to deductions or withholding for taxes.
Company shall annually review Employee's salary.
2
4.2. Annual Incentive Compensation. Employee shall be entitled
to an annual bonus (the "Annual Bonus") as determined by the
Compensation Committee of the Company's Board of Directors (the
"Compensation Committee"). The Compensation Committee shall establish
reasonable performance criteria with the targeted bonus being 50% of
Employee's Base Salary. The criteria to be developed, with the
agreement of the Employee shall be based upon increases in the
Company's cash flow and increases in the Company's oil and gas
reserves.
4.3. Equity Compensation. As of the Commencement Date, the
Company shall issue stock options (the "Options") to purchase shares of
the Company's common stock under the Company's Stock Option Plan. The
initial grant shall be Options to purchase 175,000 shares of the
Company's stock. On an annual basis thereafter, and assuming that
Employee meets the performance criteria established as provided in
Section 4.2 above, Employee shall be entitled to receive additional
stock Options in an amount of not less than Employee's Base Salary
divided by the stock price at the time of the grant of the Options. For
example, if Employee's salary is $350,000 and the stock price is $5.00
per share, the Employee will be granted Options to purchase 70,000
shares. All Options granted shall vest equally over a three year
period.
4.4. Fringe Benefits. Employee shall be entitled to annual
vacation and to receive employee and fringe benefits including but not
limited to any compensation plan such as an incentive stock option,
restricted stock or stock purchase plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical disability,
accident, plan program or policy (the Company's "Plans") as Company may
allow or provide to other similarly situated employees in accordance
with policies adopted from time to time by the Board of Directors.
4.5. Expenses Reimbursement. Employee shall be reimbursed for
all direct, out-of-pocket business expenses incurred by him in
connection with his employment (including, without limitation, expenses
for travel and entertainment incurred in conducting or promoting
business for the Company), upon timely submission by the Employee of
receipts and other documentation, and in accordance with the normal
expense reimbursement policy of the Company.
4.6. Sickness and Disability. Except as set forth in Section
5.2, Employee shall receive full compensation for any period of illness
or incapacity during the term of this Agreement.
4.7. Holidays. Employee shall be entitled to holidays
recognized as State and/or National holidays and as Company may allow
or provide in accordance with policies adopted from time to time by the
Board of Directors.
5. Termination of Employment. The following provisions shall apply in
the event of termination of Employee's employment for any reason.
5.1. Right to Terminate by Company. Company may terminate
Employee's Agreement, by action of its Board of Directors, immediately
upon written notice of termination
3
for Cause or upon thirty (30) days notice for any other reason. The
term "Cause" when referring to termination by Company means only the
following and any other termination shall be without Cause: (i) any act
of personal dishonesty taken by the Employee in connection with his
responsibilities as an Employee which is intended to result in
substantial personal enrichment to the Employee; (ii) Employee's
conviction of a felony which the Board responsibly believes has had or
will have a material detrimental effect on the Company's reputation or
business; (iii) a willful act by the Employee which constitutes
misconduct and is injurious to the Company; and (iv) continued willful
violations by the Employee of the Employee's obligations to the Company
after there has been delivered to Employee a written demand for
performance from the Company which describes the basis for the
Company's belief that the Employee has not substantially performed his
duties.
5.2. Termination for Death or Disability. Employee's
employment shall terminate upon the earliest of the events specified
below:
(i) the death of Employee;
(ii) the date of termination specified in a written notice of
termination by reason of physical or mental condition of Employee which
shall substantially incapacitate him from performing his principal
duties delivered by the Company to Employee at least 30 days prior to
the date specified in the notice, which shall be any date after the
expiration of any 120 consecutive days during which Employee shall be
unable, by reason of his disability, to perform his principal duties,
provided however, that such notice shall be null and void if Employee
fully resumes the performance of his duties under this Agreement prior
to the date of termination set forth in the notice.
5.3. Termination by Employee. If an Involuntary Termination
has occurred, Employee shall be entitled to terminate his employment
and to receive compensation equal to such compensation provided in
Section 6.3. If Employee terminates his employment for any reason other
than death, disability or Involuntary Termination, then Employee shall
provide the Company with thirty (30) days prior notice and Employee
shall be paid his compensation until the effective date of termination.
6. Change of Control and Involuntary Termination.
6.1. Definition of Terms. The following terms referred to in
this Agreement shall have the following meanings:
(i) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(a) the approval by shareholders of the Company of a
merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
4
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent
(50%) of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation;
(b) any approval by the shareholders of the Company
of a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets;
(c) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) becoming the "beneficial owner" (as defined in Rule
13d-3 under said Act), directly or indirectly, of securities
of the Company representing 25% or more of the total voting
power represented by the Company's then outstanding voting
securities; or
(d) a change in the composition of the Board, as a
result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of
the date hereof, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least
a majority of those directors whose election or nomination was
not in connection with any transaction described in
subsections (a), (b) or (c) or in connection with an actual or
threatened proxy contest relating to the election of directors
of the Company.
(ii) Involuntary Termination. "Involuntary Termination" shall
mean (a) without the Employee's express written consent, a significant
reduction of the Employee's duties, position or responsibilities
relative to the Employee's duties, position or responsibilities in
effect immediately prior to such reduction, or the removal of the
Employee from such position, duties and responsibilities, unless the
Employee is provided with comparable duties, position and
responsibilities; (b) without the Employee's express written consent, a
substantial reduction, without good business reasons, of the facilities
and perquisites (including office space and location) available to the
Employee immediately prior to such reduction; (c) a reduction by the
Company of the Employee's Base Salary as in effect immediately prior to
such reduction; (d) a material reduction by the Company in the kind or
level of employee benefits to which the Employee is entitled
immediately prior to such reduction with the result that the Employee's
overall benefits package is significantly reduced; (e) without the
Employee's express written consent, the relocation of the Employee to a
facility or a location more than fifty (50) miles from the location of
the Company's principal office; (f) any purported termination of the
Employee by the Company which is not effected for Cause or for which
the grounds relied upon are not valid; or (g) the failure of the
Company to obtain the assumption of this Agreement by any successors
contemplated in Section 7(i).
6.2. Payments Upon Termination.
(i) Severance Payments. If the Employee's employment with the
Company terminates as a result of an Involuntary Termination at any
time after a Change of Control, then
5
the Employee shall be entitled to receive a lump sum payment equal to
three (3) times Employee's annual Base Salary at the rate in effect
just prior to the date of the notice of termination, less the Value of
the Accelerated Vesting of Options under ss.6.2(ii) if such termination
occurs prior to July 9, 2001. For the purpose of this section, the
"Value of the Accelerated Vesting of Options" shall be computed by
first determining the number of options granted to Employee whose
vesting have been accelerated under ss.6.2(ii). With respect to those
options, the closing price of the Company's stock on the New York Stock
Exchange or on NASDAQ as of the date of termination, less the exercise
price shall be multiplied by the number of accelerated options and the
total Value of the Accelerated Vesting of Options shall be subtracted
from the Base Salary computation set forth above. However, in no event
shall the cash portion of the severance payment be less than two (2)
times the annual Base Salary at the rate in effect immediately prior to
the date of the notice of termination, regardless of the Value of the
Accelerated Vesting of Options.
Such severance payments shall be paid in a single lump sum
within thirty (30) days of such termination. In addition, the Company
shall continue to make available to the Employee and Employee's spouse
and dependents covered under any group health plans or life insurance
plans of the Company on the date of such termination of employment, all
group health, life and other similar insurance plans in which Employee
or such covered dependents participate on the date of the Employee's
termination for a period of twelve (12) months on the same basis as
provided on the date of termination.
(ii) Option Acceleration. If the Employee's employment with
the Company terminates as a result of an Involuntary Termination at any
time after a Change of Control, then the vesting and exercisability of
each option granted to the Employee by the Company (the "Options")
shall be automatically accelerated in full.
6.3. Payments on Other Termination. If the Employee's
employment with the Company terminates as a result of an Involuntary
Termination, other than as a result of an Involuntary Termination after
a Change of Control, or termination by the Company without Cause, then
the Employee shall not be entitled to receive severance or other
benefits hereunder, other than payments through the end of this
Agreement, or for one year, whichever is longer. If termination is for
Cause, Employee shall be paid his Base Salary to the date of the notice
of termination.
6.4. Accrued Wages and Vacation; Expenses. Without regard to
the reason for, or the timing of, Employee's termination of employment:
(a) the Company shall pay the Employee any unpaid base salary due for
periods prior to the date of termination; (b) the Company shall pay the
Employee all of the Employee's accrued and unused vacation through the
date of termination; and (c) following submission of proper expense
reports by the Employee, the Company shall reimburse the Employee for
all expenses reasonably and necessarily incurred by the Employee in
connection with the business of the Company prior to the date of
termination. These payments shall be made promptly upon termination and
with the period of time mandated by law.
6
7. Successors.
(i) Company's Successors. Any successor to the Company (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the Company's obligations under this Agreement and agree
expressly to perform the Company's obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and/or assets which executes and delivers the assumption agreement
described in this section or which becomes bound by the terms of this Agreement
by operation of law.
(ii) Employee's Successors. Without the written consent of the Company,
Employee shall not assign or transfer this Agreement or any right or obligation
under this Agreement to any other person or entity. Notwithstanding the
foregoing, the terms of this Agreement and all rights of Employee hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
8. Notices.
(i) General. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address that he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
(ii) Notice of Termination. Any termination by the Company for cause or
by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with this Section. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated. The failure by the Employee to
include in the notice any fact or circumstance which contributes to a showing of
Involuntary Termination shall not waive any right of the Employee hereunder or
preclude the Employee from asserting such fact or circumstance in enforcing his
rights hereunder.
9. Arbitration.
(i) Any dispute or controversy arising out of, relating to, or in
connection with this Agreement, or the interpretation, validity, construction,
performance, breach, or termination thereof, shall be settled by binding
arbitration to be held in Houston, Texas, in
7
accordance with the National Rules for the Resolution of Employment Disputes
then in effect of the American Arbitration Association (the "Rules"). The
arbitrator may grant injunctions or other relief in such dispute or controversy.
The decision of the arbitrator shall be final, conclusive and binding on the
parties to the arbitration. Judgment may be entered on the arbitrator's decision
in any court having jurisdiction.
(ii) The arbitrator(s) shall apply Texas law to the merits of any
dispute or claim, without reference to conflicts of law rules. The arbitration
proceedings shall be governed by federal arbitration law and by the Rules,
without reference to state arbitration law. Employee hereby consents to the
personal jurisdiction of the state and federal courts located in Texas for any
action or proceeding arising from or relating to this Agreement or relating to
any arbitration in which the parties are participants.
(iii) EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION,
VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING
ARBITRATION TO THE EXTENT PERMITTED BY LAW, AND THAT THIS ARBITRATION CLAUSE
CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE
RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE
RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
(a) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT;
BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF
GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR
INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT
OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.
(b) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL, STATE OR
MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE
CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA
FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, ET SEQ.;
(c) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
8
10. Miscellaneous Provisions.
(i) No Duty to Mitigate. The Employee shall not be required to mitigate
the amount of any payment contemplated by this Agreement, nor shall any such
payment be reduced by any earnings that the Employee may receive from any other
source.
(ii) Waiver. No provision of this Agreement may be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.
(iii) Integration. This Agreement and the stock option agreements
representing the Options represent the entire agreement and understanding
between the parties as to the subject matter herein and supersede all prior or
contemporaneous agreements, whether written or oral.
(iv) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal substantive
laws, but not the conflicts of law rules, of the State of Texas.
(v) Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(vi) Employment Taxes. All payments made pursuant to this Agreement
shall be subject to withholding of applicable income and employment taxes.
(vii) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
COMPANY: XXXXXX OIL AND GAS COMPANY
By: /s/ Xxxxxxx X. Xxxx
--------------------------------
Xxxxxxx X. Xxxx
Office of the Chief Executive
EMPLOYEE: /s/ Xxxxx X. Xxxx
--------------------------------
Xxxxx X. Xxxx
