EMPLOYMENT AGREEMENT
QuickLinks -- Click here to rapidly navigate through this document
Exhibit 10.12
This AGREEMENT (the "Agreement") by and between Pinnacle Gas Resources, Inc., a Delaware corporation (the "Company") and Xxxxx X. Xxxxxxxxxxx (the "Executive"), dated as of the 23rd day of June, 2003, and to be effective as of the Agreement Effective Date (as defined herein).
In entering into this Agreement, the Board of Directors of the Company (the "Board") desires to provide the Executive with substantial incentives to serve the Company as one of its senior executives performing at the highest level of leadership and stewardship, without distraction or concern over minimum compensation, benefits or tenure, to manage the Company's future growth and development, and maximize the returns to the Company's stockholders.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
(a) Position and Duties. During the Employment Period, the Executive shall hold the position of Chief Executive Officer, having the duties and responsibilities described in Exhibit A. Excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote full attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees (provided that Executive agrees that, without the prior written consent of the Board of Directors, he shall not serve as a Member of the Board of Directors of any company primarily engaged in the exploration and production of oil and gas), (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments (provided that no such investment shall exceed 5% of the equity of any entity without the prior approval of the Board; and provided further that without the prior written consent of the Board, the Executive shall not hold an ownership interest valued in excess of $50,000 in (i) an entity that is engaged in the exploration or production of oil or gas in the Powder River Basin of Wyoming and Montana, or (ii) an entity which provides drilling or other services to any entity described in clause (i) above), so long as such activities do not interfere with the performance of the Executive's responsibilities as an officer of the Company in accordance with this Agreement. The Executive will promptly disclose in writing to the Board any interest held by Executive in any entity which has an equity interest in the Company.
(iii) Initial Option Grant. As of the Closing Date (as defined in the Pinnacle Gas Resources, Inc. Preferred Stock and Common Stock Contribution and Subscription Agreement, dated as of June 23, 2003 (the "Contribution Agreement") by and among the Company, CCBM, Inc., a Delaware corporation, Rocky Mountain Gas, Inc., a Wyoming corporation and each of the CSFB Parties (as defined therein)), the Executive shall be granted an option (the "Initial Option") to purchase 3,300 shares of the Company's Common Stock (the "Option Shares"). The Initial Option may be exercised with respect to 20% of the Option Shares following the first anniversary of the Closing Date; with respect to an additional 30% of the Option Shares following the second anniversary of the Closing Date and with respect to all Option Shares following the third anniversary of the Closing Date, provided that as of each such anniversary the Executive remains in continuous employment with the Company. The exercise price of the Initial Option will be $100.00 per share, and the Initial Option shall have a term of 7 years. As a condition of his receipt of the Initial Option, the Executive will be required to become a party to the Pinnacle Gas Resources, Inc. Securityholders Agreement, dated June 23, 2003 (the "Securityholders Agreement"). The Initial Option shall be subject to (A) an employee stock option plan to be adopted by the Company ("Stock Incentive Plan"), (B) the Company's customary stock option award document containing terms consistent with the foregoing and (C) such other terms, consistent with the foregoing, to be established by the administrative committee of such Stock Incentive Plan. In addition, upon the funding of each Subsequent CSFB Contribution by the CSFB Parties, as provided in Section 2.5(a) of the Contribution Agreement, the Executive shall be granted an additional option (each an "Additional Option") to purchase an number of shares of Common Stock equal to the product of (i) amount of the Subsequent CSFB Contribution and (ii) .0001 (such product to be rounded to the nearest number of whole shares), up to a maximum of 1,200 shares of Common Stock in the aggregate for all Additional Options granted pursuant to this provision. Each Additional Caption shall have an exercise price of $100.00 per share, and will be subject to an exercise schedule, term and other conditions as if such Additional Option had been granted on the same date as the Initial Option. The terms "Common Stock," "Subsequent CSFB Contribution" and "CSFB Parties" shall have the meanings ascribed to such terms in the Contribution Agreement.
2
the extent that such plans are applicable generally to other salaried employees of the Company.
3
basis for the Board's determination that the Executive has not substantially performed his duties and responsibilities; or (iv) commission of any act or acts of moral turpitude in violation of Company policy.
(i) the assignment to the Executive of any duties materially inconsistent with the Executive's position as contemplated by Section 2 of this Agreement, or any other action by the Company which results in a material diminution in such position, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii) any material failure by the Company to comply with any of the provisions of this Agreement, other than an isolated, substantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(iii) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or
(iv) any failure by the Company to comply with and satisfy the requirements of Section 8 of this Agreement, provided that (A) the successor described in Section 8(c) has received, at least 10 days prior to the Date of Termination (as defined in subparagraph (e) below), written notice from the Company or the Executive of the requirements of such provision and (B) such failure to be in compliance and satisfy the requirements of Section 8 shall continue as of the Date of Termination.
4. Obligations of the Company upon Termination.
4
reason of Disability (but not by reason of death), or (y) the Executive shall terminate employment for Good Reason:
(i) the Company shall pay or provide to or in respect of the Executive the following amounts and benefits:
A. in a lump sum in cash, within 30 days after the Date of Termination, an amount equal to the sum of (1) the Executive's Annual Base Salary payable with respect to the period ending on the Date of Termination, (2) any deferred compensation previously awarded to or earned by the Executive with respect to the period prior to the Date of Termination (together with any accrued interest or earnings thereon) and (3) any compensation for unused vacation time for which the Executive is eligible in accordance with the plans, policies, programs and practices of the Company, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued Obligations");
B. in a lump sum cash, discounted at 6%, within 30 days after the Date of Termination, an amount equal to 100% of Annual Base Salary that would have been paid annually to the Executive pursuant to this Agreement for the period (the "Remaining Employment Period") beginning on the Date of Termination and ending on the latest possible date of termination of the Employment Period in accordance with the provisions of Section l hereof (the "Final Expiration Date") if the Executive's employment had not been terminated;
C. effective as of the Date of Termination, (1) in the case of a termination under this Section 4(a) for reasons other than Disability, immediate vesting and exercisability of each and every stock option (including the Initial Option and each Additional Option), restricted stock award, restricted stock unit award and other equity-based award and performance award (each, a "Compensatory Award") that is outstanding as of a time immediately prior to the Date of Termination and (2) the extension of the term during which each and every Compensatory Award may be exercised by the Executive until the earlier of (x) the date which is 90 days after of the Date of Termination (or, in the case of a termination due to Disability, 12 months after the Date of Termination) or (y) the date upon which the right to exercise any Compensatory Award would have expired if the Executive had continued to be employed by the Company under the terms of this Agreement until the Final Expiration Date;
D. as soon as practicable following the fiscal year of the date of termination, an amount equal to the product of (x) any Annual Bonus that would have been paid to Executive with respect to the year of termination had the Date of Termination not occurred and (y) a fraction, the numerator of which is the number of days in the fiscal year through the Date of Termination and the denominator of which is 365;
(ii) for the Remaining Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section, 2(b)(iv) of this Agreement if the Executive's employment had not been terminated in accordance with the plans, practices, programs or policies of the Company (such continuation of such benefits for the applicable period herein set forth shall be hereinafter referred to as "Welfare Benefit Continuation"), but with the Company's medical benefits coverages being secondary to any coverages provided by another employer. For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the
5
Executive shall be considered to have remained employed until the Final Expiration Date and to have retired on such date.
6
Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate, use or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. Also, within 14 days of the termination of Executive's employment for any reason, Executive shall return to Company all documents and other tangible items of or containing Company information which are in Executive's possession, custody or control. As used in this Agreement, the term "affiliated companies" shall include, when used with reference to the Company, any entity controlled by, controlling or under common control with the Company, and any entity which owns at least a 10% economic or voting interest in the Company.
7. Covenant Not to Compete; Nonsolicitation.
(a) Executive recognizes that in each of the highly competitive businesses in which the Company is engaged, the Company's trade secrets and other Confidential Information, along with personal contacts, are of primary importance in securing new drilling prospects, producing property acquisitions and customers and in retaining the accounts and goodwill of present customers and protecting the business of the Company. The Executive, therefore, agrees that during the Employment Period and (A) for a period of one year after the Date of Termination, he will not, within the Area of Mutual Interest, as defined in that certain Area of Mutual Interest Agreement made as of June 23, 2003, by and among the Company, CCBM, Inc., a Delaware corporation, Carrizo Oil & Gas, Inc., a Delaware corporation, Rocky Mountain Gas, Inc., a Wyoming corporation, U.S. Energy, Inc., a Delaware corporation, and the CSFB Parties (the "Relevant Geographic Area") (i) accept employment, advise, assist or render service in any way, directly or indirectly, to any person that is engaged in a business directly competitive with the business then engaged in by the Company or any of its affiliated companies or (ii) enter into or take part in or lend his name, counsel or assistance to any business, either as proprietor, principal, investor, partner, director, officer, executive, consultant, advisor, agent, independent contractor, or in any other capacity whatsoever, for any purpose that would be competitive with the business of the Company or any of its affiliated companies and (B) for a period of two years after the Date of Termination he will not, on his own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or offer employment to any person who has been employed by the Company or any subsidiary thereof at any time during the one-year period immediately preceding such solicitation (all of the foregoing activities are collectively referred to as the "Prohibited Activity").
The Executive shall not, directly or indirectly, make or cause to be made and shall use his best efforts to cause the officers, directors, employee, agents and representatives of any entity or person controlled by the Executive not to make or cause to be made, any disparaging, denigrating, derogatory or other negative, misleading or false statement orally or in writing to way person or entity, including members of the investment community, press, and customers, competitors and advisors to the Company, about the Company, its shareholders, subsidiaries or affiliates, their respective officers or members of their boards of directors, or the business strategy or plans, policies, practices or operations of the Company, its shareholders, subsidiaries or affiliates.
(b) In addition to all other remedies at law or in equity which the Company may have for breach of a provision of this Section 7 by the Executive, it is agreed that in the event of any breach or attempted or threatened breach of any such provision, the Company shall be entitled, upon application to any court of proper jurisdiction, to a temporary restraining order or preliminary injunction (without the necessity of (i) proving irreparable harm, (ii) establishing that monetary damages are inadequate or (iii) posting any bond with respect thereto) against the Executive prohibiting such breach or attempted or threatened breach by proving only the existence of such breach or attempted or threatened breach. If the provisions of this Section 7 should ever be deemed to exceed the time, geographic or occupational limitations permitted by the applicable law, the Executive and the Company agree that such provisions shall be and are hereby reformed to the maximum time, geographic or occupational limitations permitted by the applicable law.
7
(c) The covenants of the Executive set forth in this Section 7 are independent of and severable from every other provision of this Agreement; and the breach of any other provision of this Agreement by the Company or the breach by the Company of any other agreement between the Company and the Executive shall not affect the validity of the provisions of this Section 7 or constitute a defense of the Executive in any suit or action brought by the Company to enforce any of the provisions of this Section 7 or seek any relief for the breach thereof by Executive.
(d) The Executive acknowledges, agrees and stipulates that: (i) the terms and provisions of this Agreement are reasonable and constitute an otherwise enforceable agreement to which the terms and provisions of this Section 7 are ancillary or a part of; (ii) the consideration provided by the Company under this Agreement is not illusory; and (iii) the consideration given by the Company under this Agreement; including, without limitation, the provision by the Company of Confidential Information to the Executive as contemplated by Section 6, gives rise to the Company's interest in restraining and prohibiting the Executive from engaging in the Prohibited Activity within the Relevant Geographic Area as provided under this Section 7, and the Executive's covenant not to engage in the Prohibited Activity within the Relevant Geographic Area pursuant to this Section 7 is designed to enforce the Executive's consideration (or return promises), including, without limitation, the Executive's promise to not disclose Confidential Information under this Agreement.
(a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's heirs, executors and other legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and may only be assigned to a successor described in Section 8(c).
(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to substantially all of this business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Wyoming, without reference to principles of conflict of laws that would require the application of the laws of any other state or jurisdiction. The Company and Executive each irrevocably agree to waive their right to a trial by jury in any legal action or proceeding with respect to this Agreement.
(b) The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
(c) This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and heirs, executors and other legal representatives.
(d) All notices and other communications hereunder shall be in writing and shall be given, if by the Executive to the Company, by telecopy or facsimile transmission at the telecommunications number set forth below and, if by either the Company or the Executive, either by hand delivery to
8
the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Name:
Xxxxx X. Xxxxxxxxxxx
00 Xxxxxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
If to the Company:
Pinnacle
Gas Resources, Inc.
0 X. Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Fax Number: (000) 000-0000
Attention: Chairman of the Board
or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(e) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(f) The Company may withhold from any amounts payable under this Agreement (i) such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation and (ii) any amounts payable by the Executive to the Company under any agreement, loan or other arrangement.
(g) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be decreed to be a waiver of such provision or right or any other provision or right of this Agreement.
(h) This Agreement contains the complete and total understanding of the parties concerning the subject matter hereof and expressly supersedes any previous agreement between the parties relating to the subject matter hereof.
(i) This Agreement shall become effective as of June 23, 2003 (the "Agreement Effective Date").
(j) This Agreement may be executed in two or more counterparts, each of which will be deemed an original.
[END OF PAGE]
9
PINNACLE GAS RESOURCES, INC. |
||||
By: |
/s/ Xxxxx X. Xxxxxxxxxxx Name: Xxxxx X. Xxxxxxxxxxx Title: CEO |
|||
/s/ Xxxxx X. Xxxxxxxxxxx Xxxxx X. Xxxxxxxxxxx |
10
Exhibit A
Description of Duties and Responsibilities
EXHIBIT TO EMPLOYMENT AGREEMENT FOR XXXXX X. XXXXXXXXXXX
As Chief Executive Office, Xxxxx X. Xxxxxxxxxxx will report to the Board of Directors of Pinnacle Gas Resources, Inc. I shall be responsible for all strategic and day-to-day operations of Pinnacle Gas Resources, Inc., within approved annual budget and strategic plans for good corporate governance and behavior. As Executive, I will maintain a business orientation for action and results.
I will provide leadership for all strategic and management activities within the Company, including actions intended to provide profitable, quality performance. As Executive I will be responsible for hiring, promotion, discipline and training of all personnel for whom I am directly responsible for, subject to review and approvals as required by the Board of Directors. I will also be responsible for establishing and implementing policies guiding the operations of the Company.
As Chief Executive Officer, I will lead the drilling, development, and acquisition activities of Pinnacle Gas Resources, Inc., in concert with subordinate executives and administrative and support functions, with the objective of sustaining growth in earnings, cash flow and net revenues, responding to changing market conditions, protecting the interests of shareholders and meeting the needs of the Corporation as defined by the Board of Directors. I will cause to be proposed an annual budget and objectives reflecting the goals of the Corporation, as approved by the Board of Directors, and to conduct operations, within that approved budget and those objectives.
In the position of Chief Executive Officer, I will propose and support acquisitions, divestiture and due diligence efforts and oversee their implementation, and I will be expected to facilitate change to benefit the Corporation.
I will continue to develop positive relationships within the communities that Pinnacle operates. I will build upon the relationships that I have established with regulatory personnel and landowners to provide for timely development of the assets.
Performance will be measured by results against annually approved budgets and specific criteria defined with and by the Board of Directors.
Xxxxx
X. Xxxxxxxxxxx
CEO, Pinnacle Gas Resources, Inc.
Exhibit A Description of Duties and Responsibilities
EXHIBIT TO EMPLOYMENT AGREEMENT FOR XXXXX X. XXXXXXXXXXX