EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as of
the 1st day of January, 2000 (the "Effective Date"), by and between Magnum
Hunter Resources, Inc., a Nevada corporation ("Magnum Hunter") and its
affiliates, Gruy Petroleum Management Co., a Texas Corporation and a
wholly-owned subsidiary of Magnum Hunter, (collectively, the "Employer") and
Xxxx X. Xxxxx ("Employee").
WHEREAS, the Board of Directors of the Employer (the "Board") recognizes
that it is important to attract, hire and retain key officers and management
personnel;
WHEREAS, the Board also recognizes that, in the event of a Change in
Control (as hereinafter defined), significant distractions of its key management
and operations personnel can result because of the uncertainties inherent in
such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Employer and its stockholders to retain officers and key
employees in the event of a threat or occurrence of Change in Control and to
ensure their continued dedication and efforts in such event without undue
concern for their personal, financial and employment security; and
WHEREAS, in order to induce qualified candidates to accept employment with
the Employer and to remain in the employ of the Employer in the event of a
threat or the occurrence of a Change in Control, the Employer desires to enter
into this Agreement with the Employee.
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Employment. Employer hereby employs Employee and Employee hereby accepts
employment with Employer upon the terms and conditions hereinafter set forth.
2. Duties. Employee shall serve the Employer as President and Chief
Executive Officer of the Employer with such responsibilities as shall be
determined from time to time by the Board; provided, however, that all duties
assigned to Employee hereunder shall be commensurate with the skill and
experience of Employee. Employee agrees to devote all of his professional time,
attention, skills, benefits and best efforts to the performance of his duties
hereunder and to the promotion of the business and interests of Employer.
3. Term. This Agreement shall become effective on the Effective Date, and
shall continue, unless earlier terminated in accordance with the terms of this
Agreement, for a period of five years commencing on the Effective Date. This
Agreement shall thereafter be automatically renewed for a period of one year,
unless earlier terminated as provided herein, and unless one party has given
written notice to the other party of its or his intention not to renew this
Agreement at least thirty (30) days prior to the expiration of its then current
term (the "Term").
4. Compensation. As compensation for his services rendered under this
Agreement, Employee shall be entitled to receive the following:
(a) Base Salary. During the Term, Employee shall initially be paid an
annual salary of Three Hundred Thousand and No/100 Dollars ($300,000.00) per
annum (the "Base Salary") payable in equal payments twice a month for a total of
twenty-four (24) payments per year. The Base Salary may be increased or
decreased as the Board may determine from time to time;
(b) Expenses. Employer shall reimburse Employee for all reasonable and
necessary out-of-pocket travel and other expenses incurred by Employee in
rendering services required under the terms of this Agreement, promptly after
submission, on a monthly basis, of a detailed statement of such expenses and
reasonable documentation.
(c) Bonus. Expressly conditioned on the Employee being employed on the last
day of the fiscal year of the Employer, the Employee may receive a bonus in an
amount determined solely by the unanimous approval of the compensation committee
of Employer and the Board, in their sole discretion.
(d) Benefits. During the Term, Employee shall be entitled to receive such
group benefits as Employer may provide to its other employees at comparable
salaries and responsibilities to those of Employee.
(e) Automobile. During the Term, Employee shall have use of a company
automobile, the make and model of which shall be mutually agreed upon between
the parties. The Employer shall pay all expenses associated with the automobile,
including maintenance, insurance and fuel costs. Employee may request a newer
vintage of automobile no more than once every twenty-four (24) months.
(f) Entertainment Allowance. Employer shall reimburse Employee for all
reasonable entertainment expenses incurred by Employee in connection with
developing the business of Employer, and in no event, more than ten (10)
business days after submission on a monthly basis of a detailed statement of
such expenses and reasonable documentation.
(g) Key Man Life Insurance. Employer shall purchase Key Man Life Insurance
on Employee's life, in the face amount of Twelve Million and no/100 Dollars
($12,000,000.00). The beneficiaries of such policy shall be as follows: Six
Million and no/100 Dollars ($6,000,000.00) is to be paid to Employee's estate or
as otherwise designated by Employee, and the remaining Six Million and no/100
Dollars ($6,000,000.00) shall be paid to Employer. The money paid to Employer
2
from such policy shall be used to purchase a significant portion of the
shares of stock of Employer which were owned by Employee prior to his death, if
the estate of Employee desires to sell such shares of stock.
Except as provided in Section 7, the compensation set forth in this Section
4 will be the sole compensation payable to Employee and no additional
compensation or fee will be payable by Employer to Employee by reason of any
benefit gained by the Employer directly or indirectly through Employee's efforts
on Employer's behalf, nor shall Employer be liable in any way for any additional
compensation or fee unless Employer shall have expressly agreed thereto in
writing.
5. Confidentiality; Covenants Not-To-Compete.
(a) Acknowledgment of Proprietary Interest. Employee acknowledges and
agrees that he has had access to proprietary information and also recognizes the
sole proprietary interest of Employer in any Trade Secrets (as hereinafter
defined) of Employer. Employee further acknowledges and agrees that any and all
Trade Secrets of Employer, learned by Employee during the course of his
employment by Employer or otherwise, whether developed by Employee alone or in
conjunction with others or otherwise, is and shall be the property of Employer.
Employee further acknowledges and understands that his disclosure of any Trade
Secrets of Employer will result in irreparable injury and damage to Employer. As
used herein, "Trade Secrets" means all non-public confidential and proprietary
information of Employer whether embodied in writing, a computer disk, video or
magnetic tape, CD-Rom or in other form, relating to the business, operations or
affairs of Employer and, any other confidential information that Employee may
then possess or have under Employee's control, including, without limitation,
information derived from reports, investigations, experiments, research, work in
progress, drawings, designs, plans, proposals, codes, marketing and sales
programs, client lists, mailing lists, financial projections, any information
regarding Employer's oil and gas properties, maps, plats, surveys, geophysical
and geological data, cost summaries, pricing formula, reports, studies, well
logs, production data, land and title records, leases and all other materials,
or information prepared, compiled, evaluated, interpreted or performed, for or
by Employer. "Trade Secrets" also includes confidential information related to
the business, products or sales of Employer or Employer's customers or other
business relationships.
(b) Covenants Not-To-Divulge Trade Secrets. Employee acknowledges and
agrees that Employer is entitled to prevent the disclosure of Trade Secrets of
Employer. As a portion of the consideration for the employment of Employee and
for the compensation being paid to Employee by Employer, Employee agrees at all
times during the term of this Agreement and for three (3) years thereafter to
hold
3
in strictest confidence and not to disclose or allow to be disclosed to any
person, firm, or corporation, other than to persons engaged by Employer to
further the business of Employer, Trade Secrets of Employer, without the prior
written consent of Employer, including Trade Secrets developed by Employee.
Notwithstanding the foregoing, Employee shall not be obligated to keep secret
and not to disclose or allow to be disclosed knowledge or information (a) which
has become generally known to the public through no wrongful act of Employee;
(b) which has been rightfully received by Employee from a third party which to
Employee's knowledge was received without restriction on disclosure and not in
violation of any confidentiality obligation of said third party; (c) which has
been approved for release without restriction as to use or disclosure by written
authorization of Employer; or (d) which has been disclosed pursuant to a
requirement of a governmental agency or of law without similar restrictions or
other protections against public disclosure, or which disclosure is required by
operation of law. Without limiting the generality of the foregoing, Employee
agrees to affirmatively take such precautions as Employer may reasonably request
or Employee reasonably believes are appropriate to prevent the disclosure,
copying or use of any of the computer software programs, data bases or other
such information now existing or hereafter developed to any person or for any
purpose not specifically authorized by Employer.
(c) Abide by Third Party Confidentiality Agreements. Employee acknowledges
that Employer enters into confidentiality agreements with third parties. Without
limiting the generality of the foregoing, Employee agrees to abide by the terms
and conditions of such confidentiality agreements during the term of this
Agreement for a period beginning on the Effective Date and ending three (3)
years following the Employee's termination of employment with the Employer for
any reason.
(d) Return of Materials at Termination. In the event of any termination of
this Agreement for any reason whatsoever, Employee will promptly deliver to
Employer all documents, data and other information pertaining to Trade Secrets.
Employee shall not take any documents or other information, or any reproduction
or excerpt thereof, containing or pertaining to any Trade Secrets.
(e) Competition During the Term of this Agreement. From the period
beginning on the Effective Date and ending two (2) years following the
Employee's voluntary termination of employment with the Employer:
(i) Employee shall not, directly or indirectly, either for himself or any
other person, engage or invest in, own, manage, operate, finance, control or
participate in the ownership, management, operation, financing or control of, or
be employed by, associated with, or in any manner connected with, lend
Employee's credit to, or render services or advice to, any business whose
products
4
or activities compete in whole or in part with the oil and gas exploration
and production activities or the Employer in the southwestern and southeastern
portions of the United States and the Gulf of Mexico (including any offshore
activities) and any other business which Employer is involved in or pursuing in
the regions in which Employer is conducting such activities at the time of
Employee's termination; provided, however, that (aa) this Section 5(e) shall not
prohibit Employee from purchasing or holding an equity interest of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) whether or not such securities are listed on any
national or regional securities exchanges or have been registered under Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and (bb) this Section 5(e) shall not prohibit Employee from engaging in any such
activities unless such Employee is using Employer's Trade Secrets in connection
therewith.
(ii) Employee shall not, directly or indirectly, either for himself or any
other person (A) solicit, induce, recruit, or attempt to solicit, induce or
recruit any employee of the Employer or to leave the employ of the Employer, (B)
in any way interfere with the relationship between the Employer and any employee
thereof, (C) employ, or otherwise engage as an employee, independent contractor
or otherwise, any employee of the Employer or (D) induce or attempt to induce
any customer, representative, supplier, licensee or business relation of the
Employer to cease doing business with the Employer, or in any way interfere with
the relationship between any customer, representative, supplier, licensee or
business relation of the Employer.
(iii) Employee shall not, directly or indirectly, either for himself or any
other person, do business with or solicit the business of any person known to
Employee to be a customer of, or potential customer of, the Employer, whether or
not the Employee had personal contact with such person, with respect to
products, services or other business activities which compete in whole or in
part with the products, services or other business activities of the Employer.
(f) Tolling of Statute of Limitations. In the event of a breach by Employee
of any covenant set forth in Section 5 above, the term of such covenants shall
be extended by the period of the duration of such breach.
(g) Reasonableness of Terms. The time, scope, geographic area and other
provisions hereof are reasonable and are necessary under the circumstances to
protect the Employer and to enable the Employer to receive the benefit of this
bargain under this Agreement.
(h) Reformation. If a court of competent jurisdiction determines that the
limitations as to time, geographical area or scope of activity to be restrained
5
contained herein are not reasonable and impose a greater restraint than is
necessary to protect the goodwill or other business interest of the Employer,
then the parties agree that such court should (and Employee will request such
court to) reform this Agreement to the extent necessary to cause the limitations
contained herein as to time, geographical area and scope of activity to be
restrained to be reasonable and to impose a restraint that is not greater than
necessary to protect the goodwill or other business interests of the Employer
and such court then shall enforce this Agreement as reformed.
6. Prohibition of Disparaging Remarks. Employee shall, during the term of
this Agreement, refrain from making disparaging, negative or other similar
remarks concerning Employer, any of its subsidiaries or other affiliated
companies, to any third party that causes substantial harm to Employer, except
to the extent that Employee is required to make such remarks (a) by applicable
law or regulation or judicial or regulatory process or (b) in or in connection
with any pending or threatened litigation relating to this Agreement or any
transaction contemplated hereby or thereby. Similarly, Employer shall, during
the term of this Agreement, refrain from making disparaging, negative or other
similar remarks concerning Employee to any third party except to the extent that
Employer is required to make such remarks (a) by applicable law or regulation or
judicial or regulatory process or (b) in or in connection with any pending or
threatened litigation relating to this Agreement or any transaction contemplated
hereby or thereby. In view of the difficulty of determining the amount of
damages that may result to the parties hereto from the breach of the provision
of this Section 6, it is the intent of the parties hereto that, in addition to
monetary damages, any non-breaching party shall have the right to prevent any
such breach in equity or otherwise, including without limitation prevention by
means of injunctive relief.
7. Termination Events.
(a) This Agreement and the employment relationship created hereby shall
terminate upon the occurrence of any of the following events:
(i) The expiration of the Term or any renewal period as set forth in
Section 3 above, provided that either Employee or Employer has given at least
thirty (30) days prior written notice to the other party of such party's
intention not to renew;
(ii) The death of Employee;
(iii) The "Disability" (as hereinafter defined) of Employee;
(iv) Written notice from Employer to Employee of termination for "Just
Cause" (as hereinafter defined); or
6
(v) Thirty (30) days written notice by Employee to Employer for "Good
Reason" (as hereinafter defined) provided that the event constituting Good
Reason occurs within one (1) year of a "Change in Control" (as hereinafter
defined).
(b) Definitions.
(i) For purposes of Section 7(a)(iii) above, the "Disability" of Employee
shall mean a physical or mental infirmity which impairs the Employee's ability
to substantially perform his duties under this Agreement for a period of 120
consecutive days or for 120 days out of any 150 consecutive day period.
(ii) For purposes of Section 7(a)(iv) above, "Just Cause" shall mean:
(1) the failure of Employee to diligently or effectively perform his duties
under this Agreement;
(2) If Employee has been accused of sexually-harassing another individual
and such accusation is either confirmed by Employer upon its own investigation
or confirmed by a finding of a court of competent jurisdiction or the EEOC;
(3) the commission by Employee of any act involving moral turpitude or the
commission by Employee of any act or the suffering by Employee of any occurrence
or state of facts which renders Employee incapable of performing his duties
under this Agreement, or adversely affects or could reasonably be expected to
adversely affect Employer's business reputation;
(4) any breach by Employee of any of the material terms of, or the failure
to perform any material covenant contained in, this Agreement; or
(5) the violation by Employee of material instructions or material policies
established by Employer with respect to the operation of its business and
affairs or Employee's failure, in a material respect, to carry out the
reasonable instructions of the Board of Employer;
provided, however, that no termination of Employee's employment shall be
for Just Cause under Section 7(a)(iv) until there shall have been delivered to
the Employee a copy of a written notice setting forth that the Employee was
guilty of the particular conduct and specifying the particulars thereof in
detail, and the Employee shall have been provided an opportunity to be heard by
the entire Board.
7
(iii) For purposes of Section 7(a)(v) above, the term "Good Reason" shall
mean the occurrence of any of the events or conditions described in items (1)
through (7) below within one (1) year after a Change in Control has occurred:
(1) A substantial adverse change in the Employee's status, position or
responsibilities (including reporting responsibilities) which represents an
adverse change from his status, position or responsibilities as in effect
immediately prior thereto;
(2) Any reduction in the Employee's Base Salary;
(3) The Employer's requiring the Employee to be based at any place outside
fifty (50) miles from Irving, Texas, except for reasonably required travel in
connection with the Employer's business which is not greater than such travel
requirements prior to the Change in Control;
(4) The insolvency of Employer or the filing (by any party, including the
Employer) of a petition for the bankruptcy of the Employer;
(5) Any material breach by the Employer of any provision of this Agreement;
(6) Any purported termination of the Employee's employment for Just Cause
by the Employer which does not comply with the terms of Section 7(a)(iv) or
Section 7(b)(ii); or
(7) The failure of the Employer to obtain an agreement, satisfactory to the
Employee, from any successor or assignee of the Employer to assume and agree to
perform this Agreement, as contemplated in Sections 2, 3, 7 and 8 hereof.
(iv) For purposes of Section 7(a)(v) above, the term "Change in Control" of
the Employer shall mean if any of the following events have occurred:
(1) An acquisition of any voting securities of the Employer (the "Voting
Securities") by a "Person" (as that term is used for the purposes of Section
13(d) of the Exchange Act) immediately after which such person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of one hundred percent (100%) or more of the combined voting power of the
Employer's then outstanding Voting Securities; or
(2) The following events have occurred during a one (1) year period:
8
(a) The Chief Executive Officer changes for any reason;
(b) An acquisition of any voting securities of the Employer (the "Voting
Securities") by a "Person" (as that term is used for the purposes of Section
13(d) of the Exchange Act) immediately after which such person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of forty percent (40%) or more of the combined voting power of the Employer's
then outstanding Voting Securities; and
(c) The individuals who, as of January 1, 2000, and each January 1
thereafter are members of the Board (the "Incumbent Board") cease to constitute
at least fifty-one percent (51%) of the members of the Board.
8. Termination Payments.
(a) In the event of the termination of Employee's employment for any reason
specified in Section 7 (other than the reasons set forth in Sections 7(a)(iii)
or Section (a)(v)), Employee shall be entitled only to the compensation earned
by him as of the effective date of termination, including any declared but
unpaid, bonus or pro-rata portion thereof.
(b) In the event of the termination of Employee's employment as the result
of Section 7(a)(iii), Employee shall be entitled to compensation for the
remaining term of the Agreement until the disability insurance company begins
making payments to the Employee.
(c) In the event of the termination of the Employee's employment for the
reason specified in Section 7(a)(v), Employee shall be entitled to receive,
immediately in one lump sum, three (3) times the current Base Salary, plus
annualized bonus from the previous year, plus the value of the automobile
benefits outlined in this Agreement for the current year.
(d) In addition, any medical, dental and group life insurance covering the
Employee and his dependents shall continue until the earlier of (i) twelve (12)
months after the Change in Control or (ii) the date the Employee becomes a
participant in the group insurance benefit program of a new employer, with the
understanding that the Employer shall pay for such benefits for the Employee,
and the Employee shall pay for that portion of the premiums related to the
coverage for Employee's dependents.
9
9. Remedies. Each party recognizes and acknowledges that in the event of
any default in, or breach of any of, the terms, conditions and provisions of
this Agreement (either actual or threatened) by the other party, then the
non-defaulting party's remedies at law shall be inadequate. Accordingly, each
party agrees that in such event, the non-defaulting party shall have the right
of specific performance and/or injunctive relief in addition to any and all
other remedies and rights at law or in equity, and such rights and remedies
shall be cumulative.
10. Acknowledgments. Employee acknowledges and recognizes that the
enforcement of any of the non-competition provisions set forth in Section 5
above by Employer will not interfere with Employee's ability to pursue a proper
livelihood. Employee further represents that he is capable of pursuing a career
in other industries to earn a proper livelihood. Employee recognizes and agrees
that the enforcement of this Agreement is necessary to ensure the preservation
and continuity of the business and good will of Employer. Employee agrees that
due to the nature of Employer's business, the non-competition restrictions set
forth in this Agreement are reasonable as to time and geographic area. Employer
and Employee hereby agree that notwithstanding any other provision of this
Agreement, Employee shall have all rights to products or information, or
applications of such information, which do not relate to Employer's business and
were developed during the non-employment hours and without utilizing any
resources of Employer.
11. Notices. Any notices, consents, demands, requests, approvals and other
communications to be given under this Agreement by either party to the other
shall be deemed to have been duly given in writing personally delivered, by
facsimile or sent by mail, registered or certified, postage prepaid with return
receipt requested, as follows:
If to Employer: 000 Xxxx Xxx Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Employee: 00000 Xxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Notices delivered personally shall be deemed communicated as of actual
receipt or receipt of facsimile; mailed notices shall be deemed communicated as
of three (3) days after mailing.
10
12. Survival. The following sections of this Agreement shall survive
termination of this Agreement for any reason: Sections 5, 6, 7, 8, 9, 11, 13,
14, 15, 16 and 17.
13. Arbitration. The parties agree to binding arbitration in any action,
proceeding or counterclaim arising out of or relating to this Agreement. Such
arbitration will be conducted in Dallas, Texas through the offices of and in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Judgment upon the award rendered in any arbitration may be entered
in any court of competent jurisdiction or application may be made to such court
for a judicial acceptance of the award and an enforcement, as the law of such
jurisdiction may require or allow.
14. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto and supersedes all prior agreements and understandings, oral or
written between the parties hereto. No modification or amendment of any of the
terms, conditions or provisions herein may be made otherwise than by written
agreement signed by the parties hereto.
15. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
16. Parties Bound. This Agreement and the rights and obligations hereunder
shall be binding upon and inure to the benefit of Employer and Employee, and
their respective heirs, personal representatives, successors and assigns.
Employer shall have the right to assign this Agreement to any affiliate or to
its successors or assigns provided that such affiliate, successor or assign
agrees to be bound by the terms hereof. The terms "successors" and "assigns"
shall include any person, corporation, partnership or other entity that buys all
or substantially all of Employer's assets or all of its stock, or with which
Employer merges or consolidates. The rights, duties or benefits to Employee
hereunder are personal to him, and no such right or benefit may be assigned by
him.
17. Estate. If Employee dies prior to the payment of all sums owed, or to
be owed, to Employee pursuant to Section 4 above, then such sums, as they become
due, shall be paid to Employee's estate.
18. Enforceability. If, for any reason, any provision contained in this
Agreement should be held invalid in part by a court of competent jurisdiction,
then it is the intent of each of the parties hereto that the balance of this
Agreement be enforced to the fullest extent permitted by applicable law. It is
the intent of each of the parties that the covenants not-to-compete contained in
Section 5 above be enforced to the fullest extent permitted by applicable law.
Accordingly, should a court of competent jurisdiction determine that the scope
of any covenant is too broad to be enforced as written, it is the intent of each
of the
11
parties that the court should reform such covenant to such narrower scope
as it determines enforceable.
19. Waiver of Breach. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party.
20. Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
21. Costs. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which he or it may be entitled.
22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument, but only one of which need be produced.
EMPLOYER:
GRUY PETROLEUM MANAGEMENT CO.
/s/Xxxxxx X. Xxxxxxxx
By: ________________________________________
Xxxxxx X. Xxxxxxxx
Vice President, General Counsel and Secretary
EMPLOYER'S PARENT COMPANY:
MAGNUM HUNTER RESOURCES, INC.
/s/Xxxxxxx X. Xxxx
By: ________________________________________
Xxxxxxx X. Xxxx
Chairman and Executive Vice President
EMPLOYEE:
/s/Xxxx X. Xxxxx
----------------------------------------
Xxxx X. Xxxxx
12
