EMPLOYMENT AGREEMENT
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF MIDLAND )
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into effective as of
the 1st day of September, 2001.
By this Agreement, CAP ROCK ENERGY CORPORATION, referred to in this Agreement as
"Company", acting by and through its Chief Executive Officer, Xxxxx X. Xxxxxx,
hereinafter referred to as the "CEO", agrees to employ XXX XXXXXX, referred to
in this Agreement as "Xxxxxx", and Xxxxxx hereby agrees to accept employment on
the following terms and conditions as set forth herein:
ARTICLE 1
TERMS OF EMPLOYMENT
1.01 By this Agreement, the Company, acting by and through and under the
direction of CEO, employs Xxxxxx and Xxxxxx accepts employment with the Company
as its Senior Vice President and Chief Financial Officer for an initial term of
two (2) years. Unless a written notice to terminate this Agreement is executed
and properly delivered by either party at least one (1) year prior to an
anniversary date, this Agreement shalt annually and automatically be renewed for
an additional term of one (1) year. This Agreement may, however, be terminated
earlier, as provided in Article 4, below.
1.02 During the term of this Agreement, Xxxxxx shall serve in the capacity of
Senior Vice President and Chief Financial Officer. Xxxxxx shall report directly
to the CEO. Xxxxxx' job responsibilities shall be those set forth on the
attached "Position Specification".
1.03 During the term of this Agreement, and excluding any periods of
disability, vacation or sick leave to which Xxxxxx is entitled, Xxxxxx shall
devote his full business time, attention and energies to the business of the
Company. During the term of this Agreement, it shall not be a violation of
this Agreement for Xxxxxx to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures or fulfill speaking engagements
and (iii) manage personal investments, so long as such activities do not
interfere with the performance of Xxxxxx' responsibilities as an employee of
the Company in accordance with this Agreement.
1.04 Xxxxxx will perform his duties under this Agreement with fidelity and
loyalty, to the best of his ability, experience and talent and in a manner
consistent with his duties and responsibilities.
1
ARTICLE 2
EMPLOYMENT COMPENSATION & BENEFITS
2.01 As compensation for all services rendered under this Agreement, Xxxxxx
shall be paid by Company a salary of $175,000.00 per year, or any greater amount
of compensation including bonuses, fees and deferred compensation authorized by
the wage and salary plan or Board policies authorized by the Company, together
with an annual salary adjustment in an amount at least equal to any approved
across the board salary adjustments for all employees, plus annual bonuses
approved by the Board of Directors.
2.02 Xxxxxx shall receive the same annual leave and sick leave and all other
benefits as are accorded regular full-time employees of the Company including
provisions governing accrual and payment therefore on early retirement or other
methods of employment. Xxxxxx shall receive four (4) weeks paid vacation for
each year of employment with the Company.
2.03 Subject to the above paragraph 2.02, all provisions of the Company's
rules and regulations relating to annual leave(vacation), sick leave, early
retirement, insurance, savings, deferred compensation, bonuses, pension
program contributions, holiday and other fringe benefits and working
conditions as they now exist or hereafter may be amended, shall apply to
Xxxxxx as they would to other employees of the Company.
2.04 Because Xxxxxx' duties will from time to time require him to work outside
of, and in addition to, the Company's established normal work week, work days
and work hours, Xxxxxx shall be allowed to take compensatory time off.
2.05 The Company and Xxxxxx understand and agree that Xxxxxx will not be
required to live in Midland and will live in the Dallas area and commute as
necessary from Dallas to Midland. The Company shall reimburse Xxxxxx for travel
expenses to and from Dallas to Midland. In addition, the Company shall provide
Xxxxxx a company furnished apartment and a Company automobile for use in
Midland.
2.06 The Company shall reimburse Xxxxxx for the golf dues and fees associated
with his membership in Dallas. Xxxxxx shall be responsible for the membership
fee and personal expenses such as meals. Further, since Xxxxxx plans to use the
membership for entertainment expenses, the Company shall reimburse Xxxxxx for
business related expenses associated with such membership.
ARTICLE 3
COVENANT TO PERFORM
3.01 Xxxxxx shall report directly to the CEO. Xxxxxx agrees and covenants
to perform his work and services diligently and use his best efforts to
faithfully comply with all of the assignments duly made to him on behalf of
the Company by CEO.
2
3.02 Xxxxxx agrees to execute and honor and abide by the Company's "Employee
Pledge and Proprietary Rights and Information Agreement" which all other
employees of the Company have executed and agreed to, a copy of which is
attached hereto as Exhibit "A".
ARTICLE 4
TERM AND TERMINATION
4.01 The Company shall employ Xxxxxx pursuant to this Agreement for the two
(2) year term beginning on the effective date of his employment hereunder,
automatically renewable for one (1) year terms unless either party provides
at least one (1) years advance notice prior to an anniversary date as set
forth in Article 1 above. However if during such employment, Xxxxxx fails or
refuses to perform the work and services assigned to him on behalf of the
Company by the CEO, or should he become derelict in so performing, or become
unable to perform, or otherwise become in substantial breach of this
Agreement all as may be determined by the CEO in his sole discretion or
otherwise so act as to give the Company good cause, this Agreement shall, at
the CEO's sole option, cease and terminate and any of Xxxxxx' rights
hereunder not already finally vested shall cease on or at such time as the
CEO shall notify Xxxxxx in writing. The term "good cause" shall include the
following:
(1) Knowingly, willfully and substantially, during the term of this
Agreement, neglecting the duties that Xxxxxx is required to perform
under the terms of this Agreement.
(2) Knowingly, willfully and substantially, during the term of this
Agreement, committing clearly dishonest acts toward the Company with
the intent to injure or damage the Company.
(3) Conviction of Xxxxxx by a court of competent jurisdiction of any
felony or a crime involving moral turpitude;
(4) Insubordination or failing to follow the directives of the
President/CEO.
4.02 If Xxxxxx' employment terminates for any reason other than as provided
for in paragraphs 4.01, 4.03, 4.04, 4.05, 4.06, the Company shall pay Xxxxxx
a lump-sum cash settlement equal to the total salary then in effect for the
remaining two (2) year term of the contract, plus the amount the Company
would have paid for during such period for Xxxxxx' retirement-pension plans,
and health insurance, plus such amounts, if any, are at the time of his
termination of employment, payable for accrued but untaken vacation and sick
leave, compensatory time, bonuses and other compensation authorized by the
Board of Directors.
3
4.03 Notwithstanding paragraphs 4.01 and 4.02, this Agreement and Xxxxxx'
employment hereunder may be terminated at such time and upon such terms and
conditions as the parties may mutually agree.
4.04 Notwithstanding the provisions of paragraphs 4.01, 4.02 and 4.03 above,
Xxxxxx employment hereunder shall terminate under any of the following
conditions:
(1) DEATH. Xxxxxx' employment under this Agreement shall terminate
automatically upon his death. In such event, Xxxxxx' Base Salary
shall continue to be paid to his designated beneficiary for the
remaining term of this Agreement.
(2) TOTAL DISABILITY. The Company shall have the right to terminate this
Agreement if Xxxxxx becomes Totally Disabled. For purposes of this
Agreement, "Totally Disabled" means that Xxxxxx is not working and
is currently unable to perform the substantial and material duties
of his position hereunder as a result of sickness, accident or
bodily injury for a period of three months. Prior to a determination
that Xxxxxx is Totally Disabled, but after Xxxxxx has exhausted all
sick leave and vacation benefits provided by the Company, Xxxxxx
shall continue to receive his Base Salary, offset by any disability
benefits he may be eligible to receive, for the remaining term of
this Agreement.
4.05 Notwithstanding any other provisions in this Agreement, if (i) Xxxxxx
remains employed until the date that is three (3) months after the date of a
Change in Control (the "Retention Date"), or (ii) Xxxxxx' employment is
terminated after or in anticipation of a Change in Control (or the execution of
a definitive agreement providing for actions which, if completed, would
constitute a Change in Control) and before the Retention Date (A) by the Company
without Good Cause or (B) by Xxxxxx for Good Reason, then, in addition to any
other amounts payable pursuant to this Agreement, the Company shall pay Xxxxxx a
lump sum cash payment within thirty (30) days of termination equal to six (6)
times the sum of Xxxxxx' annual Base Salary and the greater of (x) the highest
bonus awarded to Xxxxxx in a prior year or (y) 50% of Xxxxxx' annual Base
Salary.
For purposes of this Agreement "Change in Control" means: (i) a
reorganization or merger of the Company with or into any other company which
will result in the Company's stockholders immediately prior to such transaction
not holding, as a result of such transaction, at least 50% of the voting power
of the surviving or continuing entity or the entity controlling the surviving
or continuing entity; (ii) a sale of all or substantially all of the assets of
the Company to an entity in which the Company's stockholders immediately prior
to such sale will not hold following such sale at least 50% of the voting power
of such purchasing entity; (iii) a transaction or series of related
transactions which result in more than 50% of the voting power of the Company
being "beneficially owned" by a single "person" (quoted terms having their
respective meanings under Sections 13(d) and 14(d) under the Securities
Exchange Act of 1934, as amended); (iv) a change in the majority of the Board
not approved by at least two-thirds of the Company's directors in office prior
to such
4
change or (v) the adoption of any plan of liquidation providing for the
distribution of all or substantially all of the Company's assets.
For purposes of this Agreement, after a Change in Control, "Good Reason"
shall mean the occurrence of any one of the following circumstances without
Xxxxxx' consent:
(1) a material reduction in Xxxxxx' salary or benefits excluding the
substitution of substantially equivalent compensation and benefits;
(2) a material diminution of Xxxxxx' duties, authority or
responsibilities as in effect immediately prior to such diminution;
(3) the relocation of Xxxxxx' primary work location to a location more
than 50 miles from Xxxxxx' primary work location as of the date of
this Agreement; or
(4) the failure of a successor to assume and perform under this
Agreement
4.06 In the event Xxxxxx is eligible to receive a lump sum payment pursuant to
this Agreement and such lump sum payment would cause Xxxxxx to be subject to an
excise tax in excess of normal income taxes on such lump sum, then and in that
event, the lump sum payment shall be increased (grossed up) in an amount
sufficient to pay such excise tax.
ARTICLE 5
TRADE SECRETS AND CONFIDENTIAL INFORMATION
5.01 During the term of Xxxxxx' employment, the Company will provide Xxxxxx
access to, so he may become familiar with, various trade secrets and other
confidential or proprietary information of the Company, train his in the use of
same, and provide associates a working environment in which he can contribute
toward enhancing same and upgrading his general knowledge. Trade secrets,
proprietary information and confidential information encompass, without
limitation, anything which is owned by the Company and is regularly used in the
operation of the business of the Company to obtain a competitive advantage over
the Company's competitors who do not know, have access to, or utilize such
information or trade secrets. Proprietary information further includes, but is
not limited to, records, files, documents, bulletins, publications, manuals,
financial data and information concerning and the identity of customers,
prospects and suppliers. Trade secrets further include, but are not limited to,
specifications, software programs, both the source code and the object code,
documentation, flow charts, diagrams, schematics, data, data bases, and
business and production methods and techniques.
5.02 Xxxxxx acknowledges that such training and the use of the trade
secrets and confidential or proprietary information will enable him to
perform his job and enhance his compensation. Xxxxxx recognizes and
acknowledges that the trade secrets and other confidential or proprietary
information
5
of the Company are valuable, special and unique and that the protection
thereof is of critical importance to the Company in maintaining its
competitive position. Xxxxxx, therefore, covenants and agrees that, except as
required by his employment hereunder or with the express prior written
consent of the Company, he shall not, during the term of his employment by
the Company or at any time thereafter, either directly or indirectly, make
independent use of, publish or otherwise disclose any of the aforesaid trade
secrets or other confidential or proprietary information of the Company
(whether acquired, learned, obtained or developed by him alone or in
conjunction with others) to any person, firm, corporation, association or
other entity for any reason or purpose whatsoever or allow any other person,
firm, corporation, association or other entity to make use of, publish or
disclose any of the aforesaid trade secrets or other confidential or
proprietary information. Xxxxxx agrees not to use, steal, or appropriate such
items or versions thereof, whether copies or reconstructed from memory or
otherwise, in any manner. Xxxxxx further recognizes and acknowledges that in
order to enable Company to perform services for its customers and engage in
Company's business, information may be furnished to the Company that is
confidential information and that the goodwill afforded to Company depends
upon, among other things, Company and its employees keeping such services and
information confidential. Xxxxxx therefore agrees that he shall keep all such
information of the Company and any of its affiliates and subsidiaries
completely and absolutely confidential. This agreement not to disclose
confidential information shall survive after the term of Xxxxxx' employment
pursuant to this Agreement. Therefore, Xxxxxx shall be bound by his agreement
herein not to disclose confidential information of the Company and its
affiliates or subsidiaries both during his employment with the Company and
after his employment with the Company is terminated. A violation by Xxxxxx of
this Article shall be a material violation of this Agreement and will justify
legal and/or equitable relief. Xxxxxx recognizes that if he breaches this
agreement and discloses confidential information or trade secrets of the
Company or any of its affiliates or subsidiaries, the Company will suffer
substantial, irreparable and continuing injuries, damages and costs attendant
thereto. Further, recognizing that money damages may not provide adequate
relief, Xxxxxx agrees that, in the event that he breaches or threatens to
breach this Agreement, the Company shall be entitled to a preliminary or
permanent injunction in order to prevent the continuation of such harm and,
as liquidated damages, Xxxxxx shall forfeit all payments made pursuant to
this Agreement from the date the Agreement was breached and any payments that
are or may be due pursuant to this Agreement, as well as any rights or
benefits, including health insurance benefits.
5.03 Xxxxxx and the Company acknowledge and agree that the fact that the
Parties have entered into this Agreement and the terms of this Agreement are
confidential. Neither of the Parties may therefore disclose the terms of this
Agreement to others, except as necessary with regard to the filing of income
taxes and other necessary documents or as required by law, or pursuant to a
subpoena or court order, unless such disclosure has been approved by the
other party's written permission.
ARTICLE 6
NON-COMPETITION AGREEMENT
6
Xxxxxx agrees that upon his termination of employment from the Company,
for a period of Five (5) years, he will not engage or participate, directly or
indirectly, in competition with the Company or any of its affiliates or
subsidiaries without the prior written consent of the Company which consent
shall not be unreasonably withheld. This Agreement shall prohibit Xxxxxx from,
among other things, attempts to serve or assist others in serving the Company's
present or potential customers. Xxxxxx further agrees that he will never at any
time after executing this Agreement, assist any person or entity in buying,
merging with or acquiring the Company unless the Company consents in writing.
ARTICLE 7
SUPERSESSION AND EFFECTIVENESS
7.01 This Agreement supersedes any other agreement or understanding,
written or oral, between the parties with respect to the matters covered
hereunder, and it contains the entire understanding of the parties and all of
the covenants and agreements between them with respect to Xxxxxx employment.
7.02 This Agreement shall bind and be for the benefit of the parties to the
Agreement, as well as their respective successors, heirs and assigns, it being
understood, however that this Agreement may be assigned only with the written
consent of both parties.
7.03 The existence and effectiveness of this Agreement between the parties
hereto does not preclude or otherwise interfere with employment of Xxxxxx by
subsidiary corporations of Cap Rock Electric Company, Inc., or by any
corporation organized by the Company's Board of Directors for the benefit of the
Company, or the receipt of compensation by Xxxxxx from any such corporations.
7.04 This Agreement shall become binding upon the parties from an as of the
date of the execution.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
originals, one being retained by each, on or as of the 27th day of September,
2001.
CAP ROCK ENERGY CORPORATION
/s/ XXX XXXXXX /s/ XXXXX X. XXXXXX
------------------------------ -----------------------------
Xxx Xxxxxx Xxxxx X. Xxxxxx, CEO
7
THE STATE OF TEXAS )
)
COUNTY OF MIDLAND )
This instrument was acknowledge before me on this the 27th day of September,
2001, by XXXXX X. XXXXXX, Chief Executive Officer of Cap Rock Energy
Corporation, a Texas corporation, on behalf of said corporation.
/s/ XXXXXX X. XXXXXXXXX
--------------------------------
Notary Public, State of Texas
Printed Name of Notary:
XXXXXX X. XXXXXXXXX
--------------------------------
My Commission Expires: 7-11-03
----------
(SEAL)
THE STATE OF TEXAS )
)
COUNTY OF MIDLAND )
This instrument was acknowledge before me on this the 27th day of September,
2001, by XXX XXXXXX.
/s/ XXXXXX X. XXXXXXXXX
--------------------------------
Notary Public, State of Texas
Printed Name of Notary:
XXXXXX X. XXXXXXXXX
--------------------------------
My Commission Expires: 7-11-03
----------
(SEAL)
8
