1
EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement") dated effective
as of the 25th day of April, 1995, is between South Texas Drilling &
Exploration, Inc., a Texas corporation (the "Company"), and Xxxxxxx Xxxxx Xxxxx
(the "Employee").
RECITALS:
The Company desires to procure the services of the Employee in the
business of the Company as its President and Chief Executive Officer as of May
1, 1995 (the "Employment Date").
The Employee desires to enter into the employment of the Company on the
Employment Date.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, the parties hereto have agreed, and do hereby agree, as
follows:
1. Term of Employment; Duties. The Company will employ the Employee in
the business of the Company, and the Employee will work for the Company, for the
period beginning as of the Employment Date, and ending two (2) years thereafter,
and thereafter from year-to-year, unless and until such employment hereunder
shall have been earlier terminated as hereinafter provided. During his
employment by the Company, the Employee shall perform such duties as shall from
time to time be delegated or assigned to him by the Board of Directors of the
Company.
2. Full Time Employment. During his employment by the Company, the
Employee will devote his full time, energy and skill to the services of the
Company and the promotion of its interests. Notwithstanding the preceding,
Employee may engage in business which does not compete with the business of the
Company provided that such business involvement does not materially interfere
with the Employee's contractual obligations hereunder.
3. Compensation. As compensation for his services to the Company under
this Agreement, the Company will pay to the Employee during the period of his
employment hereunder a base salary in accordance with the following:
(a) The Company will pay Employee a base salary of $100,000 in
year one of the initial two-year employment term (the "Employment
Term") with $80,000 payable in cash in equal monthly installments on
the last day of each month and $20,000 payable in shares of Company
common stock on the last day of the last mouth of year one of the
Employment Term (the "First Stock Payment Date"). The Employee shall
receive such number of shares of Company common stock as equals 20,000
divided by the Year One Per Share Price (as herein defined). The Year
One Per Share Price shall equal the average of the average high and
low bid quotations (as reported by the National Association of
Securities Dealers ("NASD") Electronic Bulletin Board or, if such
2
quotations are not reported by the NASD Electronic Bulletin Board, as
quoted by the Company's principal market maker) of the Company's
common stock over the thirty-one days of the month of March preceding
the First Stock Payment Date. Notwithstanding the preceding, until
such time as the Company receives aggregate gross proceeds of a
minimum of $750,000 in connection with one or more equity financings
(the "Financing Goal"), Employee's base salary shall be $3,000 per
month. At the end of the month within which the Company has reached
the Financing Goal, Employee will receive $3,000 plus an amount equal
to $3,666.66 times the number of months Employee received the reduced
base salary of $3,000. For the remainder of the first year of the
Employment Term, Employee will receive a base salary of $6,666.66 per
month.
(b) The Company will pay Employee a base salary of $150,000 in
year two of the Employment Term with $95,000 payable in cash in equal
monthly installments on the last day of each month and $55,000 payable
in shares of Company common stock on the last day of the last month of
year two of the Employment Term (the "Second Stock Payment Date"). The
Employee shall receive such number of shares of Company common stock
as equals 55,000 divided by the Year Two Per Share Price (as herein
defined). The Year Two Per Share Price shall equal the average of the
average high and low bid quotations (as reported by the National
Association of Securities Dealers ("NASD") Electronic Bulletin Board
or, if such quotations are not reported by the NASD Electronic
Bulletin Board, as quoted by the Company's principal market maker) of
the Company's common stock over the thirty-one days of the month of
March preceding the Second Stock Payment Date. Notwithstanding the
preceding, the $55,000 payable in shares of Company common stock will
be reduced to $30,000 if the Company experienced a loss for the two
consecutive quarters preceding the Second Stock Payment Date.
(c) The Company agrees to register the shares of Company common
stock issued to Employee (prior to the expiration of six months after
the date of issuance) pursuant to Sections 3(a) and 3(b) above (the
"Restricted Shares") on Form S-8 (as shares issued pursuant to an
employee benefit plan within the meaning of Rule 405 of Regulation C
under the Act) under the Securities Act of 1933, as amended (the
"Act"). Notwithstanding the preceding sentence, the Company shall not
be required to register the Restricted Shares until the Financing Goal
is reached. Additionally, to the extent the Restricted Shares are not
previously registered under the Act or eligible for sale under
paragraph (k) of Rule 144 of the Act, Employee shall have unlimited
piggyback registration rights with respect to the Restricted Shares.
The number of shares of Company common stock proposed to be included
pursuant to the exercise of any piggyback registration right in an
underwritten offering will be subject to limitation if the managing
underwriter reasonably believes that such exclusion is required. Any
such limitation will be pro rata to all other holders exercising
piggyback registration rights in proportion to the respective number
of shares they have requested to be registered.
As additional compensation for the Employee, the Company shall
provide the following:
2
3
i) Major Medical Health Insurance for the Employee
commencing August 1, 1995 (which includes $10,000 term life insurance
on the life of the Employee and the Employee shall have the sole and
absolute right to name the beneficiary or beneficiaries of such
insurance policy); and
ii) A $500 per month car allowance which amount shall
include operating expenses of the car.
In addition, the Company shall have the right to pay to
Employee a bonus in such amount as may be determined by the Company's
Board of Directors. In the event the Company has or establishes any
bonus, incentive or similar program for all employees and/or for
executive employees, Employee shall be entitled to participate. As a
full time Employee, the Employee shall be entitled to participate in
any present or future profit sharing, stock option, pension or
retirement plan or other plan of the Company for the benefit of all
employees and/or executive employees.
4. Reimbursement for Expenses. The Company shall reimburse the Employee
for all reasonable and necessary traveling expenses and other disbursements
incurred by him for or on behalf of the Company in the performance of his duties
during his employment under this Agreement. For such purpose the Employee shall
submit to the Company periodic reports of such expenses and disbursements, all
of which expenses and disbursements shall be subject to approval of the Board of
Directors of the Company.
5. Vacations. The Employee shall be entitled to a reasonable vacation
during each year of his employment under this Agreement, at such time as shall
be mutually agreed upon.
6. Termination.
(a) Except as provided in Section 6(b) below, the Employee may
only be terminated for cause, as hereinafter defined, and only after
written notice to Employee specifying the nature of the cause which
would justify the Company to terminate this Agreement and, where
curable, the Employee shall have thirty (30) days after receipt of
notice of such alleged termination for cause to cure such reason for
termination. For the purposes hereof, cause shall be defined as:
i) willful misconduct of Employee in the performance of
Employee's duties, functions and responsibilities;
ii) failure of Employee to comply in any material respect
with any duty, function or responsibility herein undertaken by
Employee;
iii) conviction of Employee of any felony offense during the
term of this Agreement; or
iv) voluntary resignation or retirement of Employee from
employment.
3
4
(b) The Company, in its sole discretion, may terminate Employee
with or without cause after May 1, 1996 through the end of the
Employment Term (the "Termination Date") upon and subject to the
following terms:
i) The Company shall pay Employee $75,000 in cash on the
Termination Date; and
ii) The Company shall issue Employee on the Termination Date
a warrant to acquire 120,000 shares of Company common stock at an
exercise price of $0.375 per share. Such warrant shall be
exercisable for a period of five years commencing on the date of
issue. The Employee shall have unlimited piggyback registration
rights with respect to the 120,000 shares issuable upon exercise
of the warrant to the extent such shares are not eligible for
sale under paragraph (k) of Rule 144 under the Act. The number of
shares of Company common stock proposed to be included pursuant
to the exercise of any piggyback registration right in an
underwritten offering will be subject to limitation if the
managing underwriter reasonably believes that such exclusion is
required. Any such limitation will be pro rata to all other
holders exercising piggyback registration rights in proportion to
the respective number of shares they have requested to be
registered.
7. Confidential Information.
(a) The Employee acknowledges that in his employment hereunder he
occupies a position of trust and confidence and agrees that he will
treat as confidential and will not, without prior written
authorization from the Company, directly or indirectly, disclose or
make known to any person, firm, association or corporation or use for
his own benefit or gain, the methods, process or manner of
accomplishing the business undertaken by the Company, or any
information, plans, formulas, products, trade secrets, marketing or
merchandising strategies, or confidential material or information and
instructions, technical or otherwise, issued or published for the sole
use of the Company, or information which is disclosed to the Employee
or in any way acquired by him during the term of this Agreement, or
any information concerning the present or future business, processes,
or methods of operation of the Company, or concerning improvements,
inventions or know-how relating to the same or any part thereof, it
being the intent of the Company, with which intent the Employee hereby
agrees, to restrict him from disseminating or using for his own
benefit any information belonging directly or indirectly to the
Company which is unpublished and not readily available to the general
public.
(b) The Employee agrees to deliver or return to the Company, upon
termination or expiration of this Agreement or as soon thereafter as
possible, all data, drawings, prints and written information furnished
by the Company or prepared by the Employee during the term of this
Agreement in connection with his services hereunder. The Employee will
retain no copies thereof after termination of this Agreement.
4
5
8. Working Facilities. The Company shall furnish Employee with an
office, supplies, equipment, and such other facilities and services as are
suitable for performance of Employee's duties in San Antonio, Texas.
9. Successors and Assigns. This Agreement is personal in its nature and
neither of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, provided,
however, that the provisions hereof shall inure to the benefit of, and be
binding upon, each successor of the Company or such other affiliate, whether by
merger, consolidation, transfer of all or substantially all assets or otherwise.
10. Notices. Any notice required or permitted to be given to the
Employee pursuant to this Agreement shall be sufficiently given if sent to the
Employee by registered or certified mail addressed to the Employee addressed to
him at 0000 Xxxxxxxx, Xxxxxxxx 0, Xxx Xxxxxxx, Xxxxx 00000, or at such other
address as he shall designate by notice to the Company, and any notice required
or permitted to be given to the Company pursuant to this Agreement shall be
sufficiently given if sent to the Company by registered or certified mail
addressed to it at 0000 Xxxxxxxx, Xxxxxxxx 0, Xxx Xxxxxxx, Xxxxx 00000, or at
such other address as it shall designate by notice to the Employee.
11. Directorship. Contemporaneously herewith, Employee will be
appointed to serve on the Company's Board of Directors until the next annual
meeting of stockholders. So long as Employee serves as President and/or Chief
Executive Officer of the Company, the Company will take all reasonable steps to
cause Employee and, at Employee's option (but only after the Financing Goal is
reached), an individual selected by Employee to be included in the Company's
authorized slate of nominees for the Board of Directors at all annual or special
meetings of stockholders to vote for the election of directors.
12. Indemnity. The Company and the Employee have entered into a
separate Indemnification Agreement contemporaneously herewith providing for the
indemnification of the Employee by the Company in connection with the Employee's
service as an officer and director of the Company.
13. Stock Options.
(a) On the Employment Date, the Company will enter into an
incentive stock option agreement with Employee providing for the grant
of incentive options effective on the Employment Date, under the
Company's stock option plan (which plan, to be adopted or before the
Employment Date by the Company's Board of Directors, and subject to
subsequent shareholder approval, will, upon receipt of such shareholder
approval, satisfy all conditions of Rule 16b-3 under the Securities
Exchange Act of 1934 (the "Exchange Act"), to acquire 1,200,000 shares
of Company common stock at an exercise price equal to the fair market
value of the Company's common stock on the Employment Date (anticipated
to be $0.375 per share, the fair market value on the date hereof). Such
options shall become exercisable, in whole or in part, in five equal
cumulative annual installments commencing on April 30, 1996. Once
exercisable, such options shall remain exercisable until expiration. In
the event of termination of employment, all options
5
6
exercisable on the date of termination shall remain exercisable
for a period of three months following termination. The options shall
expire ten years from the date of grant. The Company agrees to
promptly register on Form S-8 under the Act, all shares issuable
pursuant to the options granted to Employee under this Section 13(a),
but not prior to achieving the Financing Goal. On each May 1 (provided
Employee is then employed by the Company), the exercise date for the
240,000 shares included in the next annual installment, to become
exercisable on the next May 1, shall be accelerated to the extent
necessary for Employee to maintain, on a fully diluted basis, a 10%
interest in the Company's common stock. No acceleration will be
effected until Employee has obtained a 10% interest in the Company's
common stock, on a fully diluted basis, the determination of which, as
well as any determination regarding the maintenance of Employee's 10%
interest in the Company's common stock, shall be made as if all of
Employee's outstanding options, to the extent exercisable, had been
exercised. For purposes of the preceding sentence, if Employee has not
obtained a 10% interest in the Company's common stock prior to the
expiration of three years from the Employment Date then Employee will
be deemed to have obtained such 10% interest in the Company's common
stock at the expiration of three years from the Employment Date.
(b) If after all 1,200,000 shares covered by the incentive stock
option agreement referred to in Section 13(a) have become exercisable,
Employee does not beneficially own (including shares issuable pursuant
to then exercisable options) 10% or more of the Company's then
outstanding common stock, on a fully diluted basis, then, so long as
Employee remains employed by the Company, an additional incentive
stock option agreement shall be entered into between the Company and
Employee. Under such agreement, Employee, on each May 1 while Employee
remains an employee of the Company, shall receive an automatic grant
of additional incentive options to acquire up to 240,000 shares of the
Company's common stock to the extent necessary for Employee to obtain
or maintain, on a fully diluted basis, beneficial ownership (including
shares issuable pursuant to then exercisable options) of 10% of the
Company's common stock. The exercise price of all options granted
under this Section 13(b) shall be equal to the fair market value on
the date of automatic grant. The options shall be exercisable, in
whole or in part, commencing on the date of automatic grant and shall
expire ten years after the date of automatic grant. In the event of
termination of employment, all options exercisable on the date of
termination shall remain exercisable for a period of three months
following termination. The Company agrees to promptly register on Form
S-8 under the Act all shares issuable pursuant to the options granted
to Employee under this Section 13(b). In the event incentive stock
options cannot be granted under applicable law, Employee shall receive
nonqualified options under the stock option plan referred to in
Section 13(a). To the extent that it shall become apparent that there
will be insufficient shares available under the stock option plan to
cover the Employee's options anticipated to be granted under this
Section 13(b), the Company shall adopt an amendment to the stock
option plan providing for an increase in shares issuable thereunder
and submit such amendment to its shareholders for approval at the next
annual or special shareholders' meeting.
6
7
In the event the Company shall receive gross cash proceeds of
$10 million or more in connection with an underwritten public offering
of common stock (the "Public Offering"), then no automatic grant shall
be effected on the May 1 following the closing of the Public Offering
or at any time thereafter.
(c) The purchase price of the shares of common stock issuable
upon exercise of the options referred to in Sections 13(a) and 13(b)
is payable in cash, an equivalent fair market value of common stock,
by cashless exercise procedures, or a combination of the foregoing.
The purchase price and the number of shares issuable upon exercise of
such options are subject to adjustments in the event that certain
changes in capitalization should occur.
(d) Upon the occurrence of a change of control, all outstanding
options held by Employee, to the extent not exercisable, shall
immediately become exercisable. A change in control shall mean the
acquisition through any number of transactions by any individual or
entity (any of which is herein referred to as a "Person"), or any two
or more Persons acting as a partnership, syndicate, or other group for
the purpose of acquiring or holding securities of the Company, and any
such Person(s) controlling, controlled by, or under common control
with any such person(s), of the beneficial ownership, as determined in
accordance with Rule 13d-3 under the Exchange Act, directly or
indirectly, in the aggregate at any point in time of 50% or of
either (i) the then outstanding Company common stock, or (ii) the
combined voting power of the then outstanding Company voting
securities entitled to vote generally in the election of directors.
14. Invalid Provisions. The invalidity or unenforceability of a
particular provision of this Agreement shall not affect the enforceability of
any other provisions hereof and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
15. Amendments to the Agreement. This Agreement may only be amended in
writing by an agreement executed by both parties hereto.
16. Entire Agreement. This Agreement contains the entire agreement of
the parties hereto and supersedes any and all prior agreements, oral or written,
and negotiations between said parties regarding the subject matter herein
contained.
17. Excess Parachute Payments. In the event that payment of the amounts
this Agreement requires the Company to pay Employee would cause Employee to be
the recipient of an excess parachute payment (within the meaning of Section
280G(b) of the Internal Revenue Code of 1986, as amended), the amount of the
payments to be made to Employee pursuant to this Agreement shall be reduced to
an amount equal to one dollar less than the amount that would cause the payments
hereunder to be excess parachute payments. The manner in which such reduction
occurs, including the items of payment and amounts thereof, shall be in the sole
discretion of Employee.
7
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
South Texas Drilling & Exploration, Inc.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
XXXXXX X. XXXXXX,
Chairman of the Board
Attest:
----------------------------
Employee:
/s/ Xxxxxxx Xxxxx Xxxxx
-----------------------------------------
Xxxxxxx Xxxxx Xxxxx
8
