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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT"), made and entered into as
of September 30, 1996, by and among Titan Exploration, Inc., a Delaware
corporation (the "HOLDING COMPANY"), Titan Resources I, Inc., a Texas
corporation (the "COMPANY"), and Xxxx X. Xxxxxxxxx, an individual residing in
Midland, Texas ("EMPLOYEE"), amends and restates in its entirety that certain
Employment Agreement dated March 31, 1995 (the "ORIGINAL AGREEMENT") made by
and among the Company, Employee and Titan Resources, L.P., a Texas limited
partnership (the "PARTNERSHIP").
W I T N E S S E T H:
WHEREAS, the Company was created and organized to act as the general
partner of the Partnership, and the Original Agreement was executed in
connection therewith;
WHEREAS, the Holding Company has been recently created and organized to
serve as the holding company of the Partnership and the Company in connection
with a proposed transaction in which the Holding Company will acquire all of
the limited partnership interests of the Partnership and all of the outstanding
shares of the common stock, par value $.01 per share, of the Company (such
transactions are referred to herein as the "REORGANIZATION");
WHEREAS, it is a condition to consummation of the Reorganization that
Employee enter into an employment agreement on the terms and conditions
hereinafter set forth; and
WHEREAS, the Company desires to continue, and the Holding Company
desires to obtain, the employment of Employee, and Employee desires to be
employed by the Holding Company and the Company, upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual terms,
covenants and agreements herein contained, and intending to be legally bound
hereby, the Holding Company, the Company and Employee hereby agree that the
Original Agreement shall be amended in its entirety as follows:
1. Employment; Position. Employee shall be employed by the Holding
Company and the Company, as President, Chief Executive Officer, and Chairman of
the Board.
2. Initial Term. During the "Initial Term" (as defined below),
Employee's employment hereunder shall be upon the same terms and conditions as
set forth in Sections 2 through 7 of the Original Agreement, except that
Employee shall no longer be employed by the Partnership and the Holding Company
shall be substituted for the Partnership for the purposes of such provisions.
The provisions of Section 2 through 7 of the Original Agreement are
incorporated herein by reference and during the Initial Term such provisions
shall be binding upon the Employee, Holding Company and the Company as if fully
set forth herein.
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For purposes hereof, the "INITIAL TERM" shall be the period from the
date hereof until the date of termination of Employee's employment pursuant to
Section 5 of the Original Agreement, provided that, if the Holding Company
successfully completes an initial public offering of shares of its Common Stock
(the "PUBLIC OFFERING") prior to such date, the Initial Term shall terminate as
of the date of closing of any such Public Offering.
3. Subsequent Term. If the Holding Company closes a Public
Offering while Employee remains employed hereunder, then during the period from
the closing of such Public Offering until the earlier of (i) the second
anniversary of such closing; and (ii) the date of termination of Employee's
employment pursuant to Section 3.3 hereof (such period is the "SUBSEQUENT
TERM"), Employee's employment hereunder shall be upon the terms and conditions
set forth in the following subsections 3.1 - 3.5. Upon the commencement of the
Subsequent Term, the provisions of the Original Agreement incorporated by
reference in Section 2 hereof shall terminate and be of no further force and
effect.
3.1 Duties. Employee shall have such duties, functions,
responsibilities, and authority customarily appertaining to the position of
President, Chief Executive Officer and Chairman of the Board in a corporation;
subject, however, to the directives of the Board of Directors of the Holding
Company and the Company. During the Employment Term, Employee shall devote his
full time, skill, and attention and his best efforts during normal business
hours to the business and affairs of the Holding Company and the Company, and
in furtherance of the business and affairs of the Holding Company, the Company
and their respective subsidiaries, if any, (collectively the "RELATED
PARTIES"); except for usual, ordinary, and customary periods of vacation and
absence due to illness or other disability; provided, however, that Employee
may devote reasonable periods of time in connection with the following
activities, if such activities do not materially interfere with the performance
of Employee's duties and services hereunder and do not consume more than 10% of
Employee's working hours (which for purposes hereof will generally constitute a
40 hour work week):
(i) serving as a director or a member of a committee of
any organization, if serving in such capacity does not involve any
conflict with the business of the Related Parties and such organization
is not in competition in any manner whatsoever with the business of the
Related Parties (it being acknowledged by the parties that Employee's
service as an advisory director of Texas Commerce Bank, Midland, Texas
is permissible hereunder);
(ii) fulfilling speaking engagements;
(iii) engaging in charitable and community activities;
and
(iv) managing his personal investments so long as such
investment activities do not conflict with the provisions in subsection
3.4.
3.2. Compensation and Related Matters.
(a) Base Salary. During the Subsequent Term, Employee shall
be paid a base salary at the rate of $160,000 per annum. This base salary may
be reviewed periodically and
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increases in such base salary may be granted at the sole discretion of the
Compensation Committee, or other body so authorized by the Board of Directors
of the Holding Company.
(b) Benefits. Employee shall, during the Subsequent Term, be
eligible to participate in such insurance, medical and other employee benefit
plans of the Holding Company or the Company which may be in effect, from time
to time, to the extent such plans are generally available to other executive
officers of the Holding Company or the Company.
(c) Professional Organization Dues. During the Subsequent
Term, the Holding Company or the Company shall pay the initiation fees and
periodic dues for membership in any oil and gas professional organizations in
which Employee is currently a member, or which are otherwise approved by the
Board of Directors of the Holding Company, and the Holding Company or the
Company shall pay all charges and expenses, including reasonable travel
expenses, incurred by Employee in connection with membership in such
organizations.
(d) Vacations. Employee shall be entitled to take such
vacations as he may desire, with pay, provided that such vacations do not
interfere with the performance of his duties and services hereunder.
(e) Expenses. Employee will be reimbursed for reasonable
expenses incurred in the performance of his duties and services hereunder and
in furtherance of the business of the Related Parties upon presentation by
Employee of an itemized account, accompanied by appropriate receipts
satisfactory to the Holding Company or the Company, as the case may be, in
substantiation of such expenses.
3.3 Termination of Employment.
(a) Employee's employment hereunder:
(i) shall automatically terminate upon the occurrence of any of
the following: (A) the mental or physical incapacity or inability of
Employee to perform his duties for a consecutive period of one hundred
twenty (120) days or a non-consecutive period of one hundred eighty
(180) days during any twelve month period; (B) the death of Employee; or
(C) the voluntary resignation or retirement of Employee; and
(ii) may be terminated by the Holding Company or the Company, at
any time, for "CAUSE", which shall mean by reason of any of the
following: (A) Employee's conviction of, or plea of nolo contendere to,
any felony or to any crime or offense causing substantial harm to any of
the Related Parties (whether or not for personal gain) or involving acts
of theft, fraud, embezzlement, moral turpitude or similar conduct; (B)
malfeasance in the conduct of Employee's duties, including, but not
limited to, (1) willful and intentional misuse or diversion of any of
the Related Parties' funds, (2) embezzlement, or (3) fraudulent or
willful and material misrepresentations or concealments on any written
reports submitted to any of the Related Parties; (C) material failure by
employee to perform the duties of Employee's employment or material
failure to follow or comply with the reasonable and lawful written
directives of the Board of Directors of the Holding Company or the
Company, provided, however, that Employee
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shall have been informed, in writing, of such material failure and given
a period of not more than 60 days to remedy same; or (D) a material
breach by Employee of the provisions of this Agreement.
(b) Upon any termination of Employee's employment during the
Subsequent Term pursuant to this Subsection 3.3, all obligations of the Holding
Company and the Company under this Agreement shall terminate; provided,
however, that if Employee's employment hereunder is involuntarily terminated
without "cause", as defined above, then the Company shall continue to pay to
Employee his then-current monthly salary during the six (6) month period
following the date of such involuntary termination (the "INITIAL SEVERANCE
PERIOD"), and such payments shall continue to be made to Employee on a
month-to-month basis thereafter (the "RESIDUAL SEVERANCE PERIOD"), up to a
maximum of six (6) additional months, for so long as Employee continues to
comply with the provisions in subsection 3.4 and 3.5. Employee may, by notice
to the Company, terminate the Residual Severance Period effective as of the
first day of any month after the Initial Severance Period, and on the effective
date of such termination, payments to Employee shall be discontinued and
Employee shall have no further obligation to comply with the non-compete
covenant in subsection 3.4(d).
3.4 Business Opportunities and Intellectual Property; Personal
Investments; Confidentiality; Covenant not to Compete. Employee acknowledges
that in the course of his employment hereunder and performance of services on
behalf of the Related Parties he will become privy to various business
opportunities, economic and trade secrets and relationships of the Related
Parties. Therefore, in consideration of this Agreement and the consummation of
the Reorganization, Employee hereby agrees as provided below in this subsection
3.4:
(a) Business Opportunities and Intellectual Property.
Employee hereby assigns and agrees to assign to the Holding Company and the
Company, its successors, assigns, or designees, all of Employee's right, title,
and interest in and to all "Business Opportunities" and "Intellectual Property"
(as defined below), and further acknowledges and agrees that all Business
Opportunities and Intellectual Property constitute the exclusive property of
the Holding Company and the Company.
For purposes hereof "BUSINESS OPPORTUNITIES" shall mean all business
ideas, prospects, proposals or other opportunities pertaining to the lease,
acquisition, exploration, production, gathering or marketing of hydrocarbons
and related products and the exploration potential of geographical areas on
which hydrocarbon exploration prospects are located, which are developed by
Employee during his employment by the Related Parties, or originated by any
third party and brought to the attention of Employee during his employment by
the Related Parties, together with information relating thereto (including,
without limitation, geological and seismic data and interpretations thereof,
whether in the form of maps, charts, logs, seismographs, calculations,
summaries, memoranda, opinions or other written or charted means).
For purposes hereof "INTELLECTUAL PROPERTY" shall mean all ideas,
inventions, discoveries, processes, designs, methods, substances, articles,
computer programs, and improvements (including, without limitation,
enhancements to, or further interpretation or processing of, information that
was in the possession of Employee prior to the date of this Agreement), whether
or not patentable or copyrightable, which do not fall within the definition of
Business
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Opportunities, which Employee discovers, conceives, invents, creates, or
develops, alone or with others, while employed by the Related Parties, if such
discovery, conception, invention, creation, or development (A) occurs in the
course of Employee's employment by the Related Parties, or (B) occurs with the
use of any of the Related Parties' time, materials, or facilities, or (C) in
the opinion of the Board of Directors of the Holding Company, relates or
pertains in any way to the Related Parties' purposes, activities, or affairs;
(b) Non-Compete Obligations During Subsequent Term. Employee
agrees that during the Subsequent Term:
(i) Employee will not, other than through the Holding Company and
the Company, engage or participate in any manner, whether directly or
indirectly through any family member or as an employee, employer,
consultant, agent, principal, partner, more than one percent
shareholder, officer, director, licensor, lender, lessor or in any other
individual or representative capacity, in any business or activity which
is engaged in leasing, acquiring, exploring, producing, gathering or
marketing hydrocarbons and related products; and
(ii) all investments made by Employee (whether in his own name or
in the name of any family members or made by Employee's controlled
affiliates), which relate to the lease, acquisition, exploration,
production, gathering or marketing of hydrocarbons and related products
shall be made solely through the Holding Company and the Company; and
Employee will not (directly or indirectly through any family members),
and will not permit any of his controlled affiliates to: (A) invest or
otherwise participate alongside the Related Parties in any Business
Opportunities, or (B) invest or otherwise participate in any business or
activity relating to a Business Opportunity, regardless of whether any
of the Related Parties ultimately participates in such business or
activity;
provided that, this subsection 3.4(b) shall not apply to (x) the personal oil
and gas investments owned by Employee, his family members and his controlled
affiliates as of the date of the Original Agreement, which were identified to
the Partnership within 30 days of the date of the Original Agreement (the
"EXISTING PERSONAL INVESTMENTS"); and (y) future expenditures made by Employee,
his family members and his controlled affiliates which are required to
maintain, but not increase, their respective current ownership interests in the
Existing Personal Investments, excluding however, any expenditure to
participate in the acquisition, exploration or development of any acreage which
is not currently included in the Existing Personal Investments as of the date
hereof, unless such opportunity is first offered to, and subsequently declined
by, the Related Parties.
(c) Confidentiality Obligations. Employee hereby acknowledges
that all trade secrets and confidential or proprietary information of the
Related Parties (collectively referred to herein as "CONFIDENTIAL INFORMATION")
constitutes valuable, special and unique assets of the Related Parties'
business, and that access to and knowledge of such Confidential Information is
essential to the performance of Employee's duties hereunder. Employee agrees
that during the Subsequent Term and during the one year period following the
date of termination of Employee's employment hereunder (the "TERMINATION
DATE"), Employee will hold the Confidential Information in strict confidence
and will not publish, disseminate or otherwise disclose, directly
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or indirectly, to any person other than the Related Parties and their
respective officers, directors and employees, any Confidential Information or
use any Confidential Information for Employee's own personal benefit or for the
benefit of anyone other than the Related Parties.
For purposes of this subsection 3.4(c), it is agreed that Confidential
Information includes, without limitation, any information heretofore or
hereafter acquired, developed or used by any of the Related Parties relating to
Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial or management aspects of the business,
operations, properties or prospects of the Related Parties whether oral or in
written form in a "Related Parties' Business Records" (as defined in subsection
3.5 below), but shall exclude any information which (A) has become part of
common knowledge or understanding in the oil and gas industry or otherwise in
the public domain (other than from disclosure by Employee in violation of this
Agreement), or (B) was rightfully in the possession of Employee, as shown by
Employee's records, prior to the date of the Original Agreement; provided,
however, that Employee shall provide to the Holding Company copies of all
information described in clause (B); further provided, however, that this
subsection 3.4(c) shall not be applicable to the extent Employee is required to
testify in a judicial or regulatory proceeding pursuant to the order of a judge
or administrative law judge after Employee requests that such Confidential
Information be preserved.
(d) Post Employment Non-Compete Covenant. Employee agrees as
follows:
(i) Employee will not engage or participate in any manner,
whether directly or indirectly through any family member or as an
employee, employer, consultant, agent, principal, partner, more than one
percent shareholder, officer, director, licensor, lender, lessor or in
any other individual or representative capacity:
(A) during the six month period following the Termination
Date, in any business or activity which is engaged in leasing,
acquiring, exploring, producing, gathering or marketing
hydrocarbons and related products within the continental United
States;
(B) during the Residual Severance Period, in any business
or activity which is in direct competition with the business of
the Related Parties as to leasing, acquiring, exploring,
producing, gathering or marketing hydrocarbons and related
products within the boundaries of, or within a two mile radius of
the boundaries of, any mineral property interest of any of the
Related Parties (including, without limitation, a mineral lease,
overriding royalty interest, production payment, net profits
interest, mineral fee interest, or option or right to acquire any
of the foregoing, or an area of mutual interest as designated
pursuant to contractual agreements between any third party and
the Holding Company, the Company or the Partnership) or any other
property on which the Related Parties has an option, right,
license, or authority to conduct or direct exploratory
activities, such as three dimensional seismic acquisition or
other seismic, geophysical and geochemical activities (but not
including any preliminary geological mapping), as of the
Termination Date or as of the end of the Initial Severance
Period; provided that, this subsection (d) shall not preclude
Employee from:
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(x) making investments in securities of oil and gas
companies which are registered on a national stock
exchange, if the aggregate amount owned by Employee and
all family members and affiliates does not exceed 5% of
such company's outstanding securities; or
(y) maintaining his Existing Personal Investments,
if such personal investments do not involve any business
activity that relates to the lease, acquisition,
exploration, production, gathering or marketing of
hydrocarbons and related products other than as permitted
by subsection 3.4(b); or
(ii) Employee will not during the one year period following the
Termination Date, solicit, entice, persuade or induce, directly or
indirectly, any employee (or person who within the preceding ninety (90)
days was an employee) of any of the Related Parties or any other person
who is under contract with or rendering services to any of the Related
Parties, to (i) terminate his or her employment by, or contractual
relationship with, such person, (ii) refrain from extending or renewing
the same (upon the same or new terms), (iii) refrain from rendering
services to or for such person, (iv) become employed by or to enter into
contractual relations with any Persons other than such person, or (v)
enter into a relationship with a competitor of any of the Related
Parties.
(e) The invalidity or non-enforceability of this subsection
3.4 in any respect shall not affect the validity or enforceability of this
subsection 3.4 in any other respect or of any other provisions of this
Agreement. In the event that any provision of this subsection 3.4 shall be
held invalid or unenforceable by a court of competent jurisdiction by reason of
the geographic or business scope or the duration thereof, such invalidity or
unenforceability shall attach only to the scope or duration of such provision
and shall not affect or render invalid or unenforceable any other provision of
this Agreement, and, to the fullest extent permitted by law, this Agreement
shall be construed as if the geographic or business scope or the duration of
such provision had been more narrowly drafted so as not to be invalid or
unenforceable.
(f) Employee acknowledges that the Holding Company's and the
Company's remedy at law for any breach of the provisions of this subsection 3.4
is and will be insufficient and inadequate and that the Holding Company and the
Company shall be entitled to equitable relief, including by way of temporary
and permanent injunction, in addition to any remedies the Holding Company and
the Company may have at law. The Holding Company and the Company acknowledge
that if the Holding Company or the Company gives notice of its intention to
terminate Employee's employment pursuant to subsection 3.3(a)(ii)(C) and there
exists no justification for termination of Employee thereunder, that Employee's
remedy at law for any such improper termination is and will be insufficient and
inadequate and that Employee shall be entitled to equitable relief, including
by way of temporary and permanent injunction, in addition to any remedies
Employee may have at law.
(g) The provisions of this subsection 3.4 shall survive
termination of this Agreement.
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(h) The representations and covenants contained in this
subsection 3.4 on the part of Employee will be construed as ancillary to and
independent of any other provision of this Agreement, and the existence of any
claim or cause of action of Employee against the Holding Company or any of the
other Related Parties or any officer, director, or shareholder of the Holding
Company or any of the other Related Parties, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
the Holding Company or the Company of the covenants of Employee contained in
this subsection 3.4. In addition, the provisions of this subsection 3.4 shall
continue to be binding upon Employee in accordance with their terms,
notwithstanding the termination of Employee's employment hereunder for any
reason.
(i) The parties to this Agreement agree that the limitations
contained in this subsection 3.4 with respect to time, geographical area, and
scope of activity are reasonable. However, if any court shall determine that
the time, geographical area, or scope of activity of any restriction contained
in this subsection 3.4 is unenforceable, it is the intention of the parties
that such restrictive covenant set forth herein shall not thereby be terminated
but shall be deemed amended to the extent required to render it valid and
enforceable.
3.5 Business Records.
(a) Employee agrees to promptly deliver to the Holding
Company, upon termination of his employment hereunder, or at any other time
when the Holding Company so requests, all documents relating to the business of
the Related Parties, including, without limitation: all geological and
geophysical reports and related data such as maps, charts, logs, seismographs,
seismic records and other reports and related data, calculations, summaries,
memoranda and opinions relating to the foregoing, production records, electric
logs, core data, pressure data, lease files, well files and records, land
files, abstracts, title opinions, title or curative matters, contract files,
notes, records, drawings, manuals, correspondence, financial and accounting
information, customer lists, statistical data and compilations, patents,
copyrights, trademarks, trade names, inventions, formulae, methods, processes,
agreements, contracts, manuals or any other documents relating to the business
of the Related Parties, (collectively, the "RELATED PARTIES' BUSINESS
RECORDS"), and all copies thereof and therefrom.
(b) Employee confirms that all of the Related Parties'
Business Records (and all copies thereof and therefrom) which are required to
be delivered to the Holding Company pursuant to this Section constitute the
exclusive property of the Holding Company and the other Related Parties.
(c) The obligation of confidentiality set forth in subsection
3.4 shall continue notwithstanding Employee's delivery of any such documents to
the Holding Company.
(d) Notwithstanding the foregoing provisions of this
subsection 3.4 or any other provision of this Agreement, Employee shall be
entitled to retain any (i) written materials received by Employee in the
capacity as a shareholder of the Holding Company, and (ii) written materials
which, as shown by Employee's records, were in Employee's possession on or
prior to the date of employment by the Related Parties, subject to the Holding
Company's right to receive a copy of all such materials.
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(e) The provisions of this subsection 3.5 shall continue in
effect notwithstanding termination of Employee's employment hereunder for any
reason.
4. Divisibility of Agreement. In the event that any term, condition
or provision of this Agreement is for any reason rendered void, all remaining
terms, conditions and provisions shall remain and continue as valid and
enforceable obligations of the parties hereto.
5. Notices. Any notices or other communications required or
permitted to be sent hereunder shall be in writing and shall be duly given if
personally delivered or sent postage pre-paid by certified or registered mail,
return receipt requested, as follows:
(a) If to Employee:
000 Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
(b) If to the Holding Company or the Company:
000 Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Either party may change his or its address for the sending of notice to such
party by written notice to the other party sent in accordance with the
provisions hereof.
6. Complete Agreement. This Agreement, together with the terms of
the Original Agreement incorporated by reference in Section 2 hereof, contains
the entire understanding of the parties with respect to the employment of
Employee and supersedes all prior arrangements or understandings with respect
thereto and all oral or written employment agreements or arrangements between
the Holding Company, the Company (and any of their subsidiaries) and Employee.
This Agreement may not be altered or amended except by a writing, duly executed
by the party against whom such alteration or amendment is sought to be
enforced.
7. Assignment. This Agreement is personal and non-assignable by
Employee. It shall inure to the benefit of any corporation or other entity
with which the Holding Company or the Company shall merge or consolidate or to
which the Holding Company or the Company shall lease or sell all or
substantially all of its assets and may be assigned by the Holding Company or
the Company to any affiliate of the Holding Company or the Company or to any
corporation or entity with which such affiliate shall merge or consolidate or
which shall lease or acquire all or substantially all of the assets of such
affiliate.
8. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original and all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement in multiple counterparts as of the day and year first above written.
TITAN EXPLORATION, INC.
By: /s/ XXXX XXXXXXXXX
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Title: President
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TITAN RESOURCES I, INC.
By: /s/ XXXX XXXXXXXXX
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Title: President
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EMPLOYEE:
/s/ XXXX X. XXXXXXXXX
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Xxxx X. Xxxxxxxxx
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