Employment Agreement
Exhibit
10.2
Agreement
dated as of May 1, 2010 by and between Recovery Energy, Inc a Nevada corporation
(the "Company"), and Xxxxxxx X. Xxxxxxx (the “Executive”).
WHEREAS,
the Company and the Executive have previously entered into an Employment
Agreement dated September 14, 2009 and an amended and restated version thereof
dated December 31, 2009 (together, the "Original Agreement"); and
WHEREAS,
the Company and the Executive have agreed that the Executive's role at the
Company shall change from Chief Executive Officer and President to Chief
Financial Officer upon the commencement of employment of a new Chief Executive
Officer (the "Effective Date"); and
WHEREAS,
the Company recognized that the Executive's talents and abilities are unique,
and are integral to the success of Recovery Energy, Inc. and thus wishes to
secure the ongoing services of the Executive on the terms and conditions set
forth herein;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants set forth
below, upon the Effective Date the Original Agreement is hereby terminated and
the Company and the Executive agree as follows:
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1.
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Employment: The Company
hereby agrees to employ the Executive as the President and Chief Financial
Officer (“CFO”) of the Company, and the Executive hereby accepts such
employment, on the terms and conditions set forth
below.
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2.
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Compensation
and Related Matters:
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a.
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Base Salary.
During the Executive's term of service (the "Employment Period"), the
Company shall pay the Executive a base salary at the rate of not less than
$225,000 per year (“Base Salary”). The Executive’s base Salary
shall be paid in approximately equal installments every two
weeks. If the Executive’s Base Salary is increased by the
Company, such increased Base Salary shall then constitute the Base Salary
for all purposes of this agreement.
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b.
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Stock
Compensation: As of September 14, 2009 the Executive was granted
(the "Initial Grant") 464,200 shares of the Company's common stock
("Common Stock"). As of the Effective Date the Executive is
granted 2,100,000 shares of Common Stock (together with the Initial Grant,
the "Granted Shares"). Notwithstanding the vesting provisions
of the Original Agreement, 50% of the Granted Shares shall vest on January
1, 2011, and the remaining Granted Shares will vest in 6 equal amounts on
the first day of each calendar quarter commencing on April 1, 2011 and
ending on July 1, 2012 in
either case so long as the Executive is either (i) employed as the
Company's President and CFO on such date or (ii) died or became
permanently disabled prior to such date and was employed as the Company's
President and CFO at the time of death or
disability.
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Notwithstanding
any provision to the contrary, subsequent to the Company's first capital raise
or January 1, 2011, whichever occurs first, the Granted Shares shall vest upon
the earlier to occur of a “Change in Control” or the termination of the
Executive’s services as President and CFO by the Company other than for "Cause"
or by the Executive’s voluntary resignation for "Good Reason" (as each term is
defined below).
For
purposes of this Agreement, “Change in Control” shall mean the occurrence,
subsequent to the Effective Date, of any of the following: (A) by a transaction
or series of transactions, any “person” or “group” (within the meaning of
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of more than 35% of the
combined voting power of the Company’s then outstanding securities (provided
such person or group was not a beneficial owner of more than 35% of the combined
voting power of the Company’s then outstanding securities as of the Effective
Date); (B) as a result of any merger, consolidation, combination or sale or
issuance of securities of the Company, or as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
as of the Effective Date cease to constitute a majority of the Board of
Directors of the Company (the "Board"); (C) by a transaction or series of
transactions, the authority of the Board over any activities of the Company
becomes subject to the consent, agreement or cooperation of a third party other
than shareholders of the Company.
For
purposes of this Agreement, "Good Reason" shall mean the occurrence of any of
the following without the written consent of the Executive: (A) the
assignment to the Executive of duties inconsistent with this Agreement or a
change in his titles or authority; (B) any failure by the Company to comply with
Section 2 or Section 3 hereof in any material way; (C) the requirement of the
Executive to relocate to locations other than those provided in Section 6
hereof; or (D) any material breach of this Agreement by the
Company.
For
purposes of this Agreement, “Cause” shall mean (A) the Executive’s conviction by
a court of competent jurisdiction as to which no further appeal can be taken of
a felony (other than a violation based on operation of a vehicle) or entering
the plea of nolo contendere to such crime by the Executive; (B) the Executive’s
commission of a crime involving fraud or intentional dishonesty, which results
in the Executive’s substantial personal enrichment and material adverse effect
to the Company; (C) the Executive becoming subject to any securities related
sanctions related to the Company other than those based on an act of the Company
itself for which the Executive is charged solely as a result of his position
with the Company.
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c.
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Subsequent
Grants. Upon the occurrence of each of the following
events occurring (x) any time during the Executive’s term of service, or
(y) within 12 months after the effective date of the termination of the
Executive’s service other than by the Executive’s voluntary resignation or
for Cause, the Company will issue to the Executive the cumulative number
of shares Common Stock (the “Subsequent
Grants”):
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1. upon the
Company’s attainment of market capitalization of $100,000,000 or more, 100,000
shares of fully-vested Common Stock;
2. upon the
Company’s attainment of market capitalization of at least $200,000,000 or more,
the shares specified under subsection (c)(1) to the extent not yet issued, plus
200,000 shares of fully-vested Common Stock;
3. upon the
Company’s attainment of market capitalization of $300,000,000 or more, the
shares specified under subsections (c)(1) and (2) to the extent not yet issued,
plus 300,000 shares of fully-vested Common Stock;
4. upon the
Company’s attainment of market capitalization of $400,000,000 or more, the
shares specified under subsections (c)(1), (2) and (3) to the extent not yet
issued, plus 400,000 shares of fully-vested Common Stock; and
5. upon the
Company’s attainment of market capitalization of $500,000,000 or more, the
shares specified under subsections (c)(1), (2), (3) and (4) to the extent not
yet issued, plus 500,000 shares of fully-vested Common Stock.
By way of
example, if, as of the date that the Company’s market capitalization is first
measured for purposes of this subsection (c), the market capitalization is
determined to be $350,000,000, the Executive would become entitled to receive
600,000 shares of fully-vested Common Stock, as the cumulative issuances under
subsections (c)(1), (2) and (3).
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d.
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Over Riding Royalty
Interests: The Executive will receive a 1% overriding royalty
interest (“ORRI”) on all xxxxx and leases acquired by the Company during
the Employment Period. The ORRI will be assigned to the
Executive or an entity chosen by the Executive free and clear of all
liens, and the Company will have no interests in the ORRI once
assigned.
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e.
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Annual Bonus:
For each full fiscal year of the Company that begins and ends during the
Employment Period, and for the portion of the fiscal year of the Company
that begins in 2010 ("Fiscal Year 2010"), the Executive shall be eligible
to earn an annual cash bonus in such amount as shall be determined by the
Compensation Committee of the Board (the "Compensation Committee") (the
"Annual Bonus") based on the achievement by the Company of performance
goals established by the Compensation Committee for each such fiscal year
(or portion of Fiscal Year 2010), which may include targets related to the
earnings before interest, taxes, depreciation and amortization ("EBITDA"),
hydrocarbon production level, hydrocarbon reserve amounts of the Company;
provided, that the Annual Bonus shall be no less than $100,000.
The Compensation Committee shall establish objective criteria to be used
to determine the extent to which performance goals have been
satisfied.
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f.
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Vacation: The
Executive shall be entitled to four weeks of vacation per fiscal year.
Vacation not taken during the applicable fiscal year shall be carried over
to the next following fiscal
year.
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g.
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Expenses: The
Company will reimburse the Executive for all expenses related to Company
business, including, but not limited to travel, marketing, communication,
due diligence, legal fees and expenses,
etc.
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h.
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Welfare, Pension and
Incentive Benefit Plans:
During the Employment Period, the Executive (and his eligible spouse and
dependents) shall be entitled to participate in all the welfare benefit
plans and programs maintained by the Company from time to time for the
benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, accidental death and
dismemberment and travel accident insurance plans and
programs. In addition, during the Employment Period, the
Executive shall be eligible to participate in all pension, retirement,
savings and other employee benefit plans and programs maintained from time
to time by the Company for the benefit of its senior executives. The
Company will provide the Executive with family health insurance coverage
including medical, dental, and vision coverage, comparable to the coverage
currently held by the
Executive.
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i.
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Professional
Development. The Company will reimburse the Executive
for education and professional development expenses related to courses or
programs selected by the Executive in the energy sector up to $25,000 per
calendar year. The Executive may take such courses during normal business
hours and will not be required to utilize vacation
time.
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j.
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Registration of
Shares. Upon request of the Executive from time to time,
the Company will promptly file a registration statement with the
Securities and Exchange Commission covering the Granted Shares and the
shares of Common Stock contained in the Subsequent Grants, provided, that
each such registration statement must cover a minimum of 100,000 shares of
Common Stock. The Company may include shares of Common Stock
owned by other persons or to be issued by the Company in each
such registration statement.
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3.
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Dedication
of Time/Conflict of Interests: During the
Employment Period, the Executive shall serve as the President and CFO of
the Company, with such duties, authority and responsibilities as are
normally associated with and appropriate for such a position. The
Executive shall report directly to the Company's Chief Executive
Officer.
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The Company acknowledges the Executive
is not exclusively employed by the Company and the Company acknowledges the
Executive is currently active in a number of activities related to the energy
industry and will remain active in activities not associated with the
Company. These activities may or may not be in conflict with the best
interests of the Company. The Company specifically acknowledges the
Executive is permitted to continue allocating time to business activities
outside of the Company and waives any and all conflicts of interest(s) that may
or may not exist or develop in the future.
The Executive acknowledges the Company
is dependent upon his knowledge and skill set and will dedicate a minimum of ten
hours per week to the Company’s business.
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4.
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Responsibilities: As the President and
CFO, the Executive will have the responsibilities of a chief financial
officer and shall also be responsible, together with the Chief Executive
Officer, for developing and implementing the Company’s business plan,
locating and reviewing prospective acquisition targets, negotiating any
and all required contracts and agreements, overseeing the development plan
of all acquired properties, executing any and all documents required to
implement the Company’s business plan, and legally binding the Company to
any agreement or contract.
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5.
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Employment: The Executive’s
employment with the Company is on an at-will basis. If
terminated for any reason other than Cause or if the Executive terminates
this agreement for Good Reason, the Company will be responsible to provide
the Executive a minimum of one year's Base Salary as severance payable
immediately upon termination as well as any reimbursement of all business
expenses incurred but not yet reimbursed. The Executive may
terminate his employment for Good Reason after giving the Company detailed
written notice thereof, if the Company shall have failed to cure the event
or circumstance constituting Good Reason within five business days after
receiving such notice. Furthermore, the Company will release any and all
claims to any vested Common Stock, ORRI or other compensation provided
through the date of termination or to which the Executive is entitled at
the date of termination.
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The
Executive's right to terminate his employment hereunder for Good Reason shall
not be affected by his incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
The
provisions of Section 8 will continue in full force for a minimum period of five
years after termination.
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6.
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Location: You will be based in
Denver, Colorado. During the Employment Period, the Company
shall provide the Executive with an office. Upon mutual
agreement of the Executive and the Company, offices maybe relocated to a
different location.
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7.
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Representations
and Warranties: Company represents and
warrants to Executive that this Agreement has been duly authorized,
executed and delivered by the Company and, assuming the due execution by
the Executive, constitutes a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its
terms.
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8.
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Indemnity: The Company agrees
that if the Executive is made a party or is threatened to be made a party
to any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding") by reason of the fact that the Executive
is or was a trustee, director or officer of the Company or any predecessor
to the Company or any of their affiliates or is or was serving at the
request of the Company, any predecessor to the Company or any of their
affiliates as a trustee, director, officer, member, employee or agent of
another corporation or a partnership, joint venture, limited liability
company, trust or other enterprise, including, without limitation, service
with respect to employee benefit plans, whether or not the basis of such
Proceeding is alleged action in an official capacity as a trustee,
director, officer, member, employee or agent while serving as a trustee,
director, officer, member, employee or agent, the Executive shall be
indemnified and held harmless by the Company to the fullest extent
authorized by Nevada law, as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive
even if the Executive has ceased to be an officer, director, trustee or
agent, or is no longer employed by the Company and shall inure to the
benefit of his heirs, executors and
administrators.
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a.
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Expenses. As
used in Section 8, the term "Expenses" shall include, without limitation,
damages, losses, judgments, liabilities, fines, penalties, excise taxes,
settlements, and costs, attorneys' fees, accountants' fees, and
disbursements and costs of attachment or similar bonds, investigations,
and any expenses of establishing a right to indemnification under this
Agreement.
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b.
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Enforcement. If
a claim or request under this Section 8 is not paid by the Company or on
its behalf, within 30 days after a written claim or request has been
received by the Company, the Executive may at any time thereafter bring
suit against the Company to recover the unpaid amount of the claim or
request and if successful in whole or in part, the Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All
obligations for indemnification hereunder shall be subject to, and paid in
accordance with, applicable Nevada
law.
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c.
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Advances of
Expenses. Expenses incurred by the Executive in connection with any
Proceeding shall be paid by the Company in advance upon request of the
Executive that the Company pay such Expenses, but only in the event that
the Executive shall have delivered in writing to the Company (i) an
undertaking to reimburse the Company for Expenses with respect to which
the Executive is not entitled to indemnification and (ii) a statement of
his good faith belief that the standard of conduct necessary for
indemnification by the Company has been
met.
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d.
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Insurance. The
Company will maintain a Director’s and Officer’s Insurance Policy naming
the Executive as a covered party in an amount deemed mutually sufficient
to the Company and the
Executive.
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9.
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Survival
of Certain Provisions: The representations,
warranties and covenants and indemnity provisions contained in Sections 2,
7 and 8 of this Agreement and the Company’s obligation to pay the
Executive any compensation earned pursuant hereto shall remain operative
and in full force and effect regardless of any completion or termination
of this Agreement and shall be binding upon, and shall inure to the
benefit of, any successors, assigns, heirs and personal representatives of
the Company, the indemnified parties and any such
person.
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10.
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Notices: Notice given pursuant
to any of the provisions of this Agreement shall be in writing and shall
be mailed or delivered (a) if to the Company, at its offices at 0000
Xxxxxxx, Xxxxx 000, Xxxxxx XX 00000, and (b) if to the Executive, at 0000
X 0xx
Xxx, Xxxxxx, XX 00000.
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11.
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Counterparts: This Agreement may be
executed simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
instrument.
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12.
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Third
Party Beneficiaries: This Agreement has
been and is made solely for the benefit of the parties hereto, and their
respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this
Agreement.
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13.
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Validity: The invalidity or
unenforceability of any provision or provisions of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and
effect.
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14.
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Dispute
Resolution:
If a dispute arises out of or relating to this Agreement or the breach of
this Agreement, and if the dispute cannot be settled through direct
discussions, the parties agree to first endeavor to settle the dispute in
an amicable manner by mediation. Mediation shall consist of an informal,
nonbinding conference or conferences between the parties and the mediator
jointly, and at the discretion of the mediator, then in separate caucuses
in which the mediator will seek to guide the parties to a resolution of
the case. The parties shall attempt to select a mutually acceptable
mediator. If the parties cannot agree upon a mediator, the parties shall
seek assistance in the appointment of a mediator from a District Judge in
the State of Colorado.
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a.
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Legal
Fees and Expenses: If any contest or
dispute shall rise between the Company and the Executive regarding any
provision of this Agreement, the Company shall reimburse the Executive for
all legal fees and expenses incurred by the Executive in connection with
such contest or dispute unless an unlawful act has preceded, but only if
the Executive prevails to a substantial extent with respect to the
Executive's claims brought and pursued in connection with such contest or
dispute. Such reimbursement shall be made as soon as practicable following
the resolution of such contest or dispute (whether or not appealed) to the
extent the Company receives reasonable written evidence of such fees and
expenses.
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15.
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Choice
of Law, Jurisdiction and Venue: This Agreement shall
be governed by, construed, and enforced in accordance with the laws of the
State of Colorado. Any and all actions, suits, or judicial proceedings
upon any claim arising from or relating to this Agreement, subject to
Paragraph 9 herein, shall be instituted and maintained in the State of
Colorado. Each party waives the right to change of venue, or to file any
action, suit or judicial proceeding in federal court. Notwithstanding this
provision, if it is judicially determined that either party may file an
action, suit or judicial proceeding in federal court, such action, suit or
judicial proceeding shall be in the Federal District Court for the
District of Colorado.
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16.
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Miscellaneous: No provisions of this
Agreement may be amended, modified, or waived unless such amendment or
modification is agreed to in writing signed by the Executive and by a duly
authorized officer or a director of the Company, and such waiver is set
forth in writing and signed by the party to be charged. No waiver by
either party hereto at any time of any breach by the other party hereto of
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements
or representations, oral or otherwise, 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. The respective rights and obligations
of the parties hereunder of this Agreement shall survive the Executive's
termination of employment and the termination of this Agreement to the
extent necessary for the intended preservation of such rights and
obligations.
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17.
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Section
Headings:
The section headings in this Agreement are for convenience of reference
only, and they form no part of this Agreement and shall not affect its
interpretation.
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The
parties’ authorized representatives have executed this Agreement as of the
Effective Date, as defined above.
Xxxxxxx
X.
Xxxxxxx Recovery
Energy, Inc.
/s/ Xxxxxxx X.
Xxxxxxx
By: Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Chief Executive
Officer
