EMPLOYMENT AGREEMENT
Exhibit
10.2
Executable
Version
This
EMPLOYMENT AGREEMENT (this “Agreement”) is made as of August 1, 2008 by and
between XXXXXX PETROLEUM, INC., a Tennessee corporation (the “Company”), and
XXXXX X. XXXXXX (“Executive”).
WHEREAS,
the parties hereto wish to enter into an employment agreement to employ
Executive upon the terms and conditions herein.
NOW,
THEREFORE, in consideration of the mutual covenants and representations
contained herein, and for other good and valuable consideration, the receipt
and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
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1.
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Employment
Period.
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The
Company hereby employs Executive, and Executive agrees to serve the Company
under the terms of this Agreement, for a term of five (5) years (the “Initial
Term”), subject to earlier termination as provided herein, commencing as of the
date of this Agreement (the “Commencement Date”). On the five-year anniversary
of the Commencement Date and each successive one-year anniversary thereafter,
the term of this Agreement shall automatically be extended for an additional
period of one (1) year; provided,
however,
that
either party hereto may elect not to extend this Agreement by giving written
notice to the other party at least sixty (60) days prior to any such anniversary
date. The Initial Term and any renewal periods thereafter, until the termination
of Executive’s employment hereunder, shall be referred to herein as the
“Employment Period.”
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2.
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Duties
and Status.
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The
Company hereby engages Executive as Chief Executive Officer of the Company
on
the terms and conditions set forth in this Agreement. During the Employment
Period, Executive shall report directly to the Board of Directors of the Company
(the “Board”), and exercise such authority, perform such executive duties and
functions and discharge such executive responsibilities as are reasonably
associated with Executive’s position, consistent with the responsibilities
assigned to officers of companies comparable to the Company, commensurate with
the authority vested in Executive pursuant to this Agreement and consistent
with
the Certificate of Incorporation and By-laws of the Company. Without limiting
the generality of the foregoing, Executive shall undertake his duties in a
manner consistent with the best interests of the Company and shall perform
his
duties to the best of his ability and in a diligent and proper manner. Executive
shall perform all duties, services and responsibilities in accordance with
the
guidelines, policies and procedures established by the Board from time to time.
Executive further agrees to devote his entire business time, attention, full
skill and best efforts to the interests and business of the Company.
Notwithstanding the foregoing or any other provision of this Agreement, it
shall
not be a breach or violation of this Agreement for the Executive to (i) serve
on
corporate (subject to approval of the Board), civic or charitable boards or
committees, (ii) deliver lectures, fulfill speaking engagements or teach at
educational institutions, or (iii) manage personal real estate investments,
so
long as such activities do not significantly interfere with or significantly
detract from the performance of the Executive’s responsibilities to the Company
in accordance with this Agreement.
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3.
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Compensation;
Benefits and Expenses.
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(a) Salary.
The
Company shall pay to Executive, as compensation for the performance of his
duties and obligations under this Agreement, a base salary at the rate of
$250,000 per annum during the Employment Period, payable in arrears in
accordance with the normal payroll practices of the Company for its executive
officers. Executive’s base salary shall be subject to review each calendar year
by the Board in its sole discretion.
Further,
Executive’s base salary shall be increased for each year of the Employment
Period at the beginning of each such year by an amount not less than the COLA
Adjustment. COLA Adjustment means the cost of living adjustment, which shall
correspond to the percent rise in prices for the preceding year as measured
by
the Consumer Price Index for all Urban Consumers (CPI-UC), All City Average,
all
Items published by the United States Department of Labor, Bureau of Labor
Statistics (the “Index”). The COLA Adjustment shall be determined by multiplying
the amount or figure to be adjusted by a fraction, the numerator of which is
the
Index published for the month in which occurs the date of adjustment and the
denominator of which is the Index published for the same month of the preceding
year.
(b) Bonus.
In
addition to the base salary payable to Executive hereunder, Executive also
shall
be entitled to receive a one-time sign-on bonus equal to $300,000, one-half
of
which shall be payable on or about the execution and delivery of this Agreement
and the other half of which shall be payable on the one-year anniversary of
the
date hereof.
(c) Equity.
In
addition to base salary and bonuses, Executive shall be entitled to the
following equity in the Company:
(i) Stock
Options.
Option
to purchase 250,000 shares of the Company’s common stock at an exercise price
equal to $0.33 per share, vesting in equal annual installments over a period
of
four (4) years from the grant date, or immediately with respect to all such
options in the event of a Change in Control (as defined in Section 5(c) hereof)
and exercisable for a period of ten (10) years from the date of grant, which
option shall be granted on or about the execution and delivery of this
Agreement;
(ii) Restricted
Stock Grant.
250,000
restricted shares of the Company’s common stock vesting in equal annual
installments over a period of four (4) years from the issuance date, or
immediately with respect to all such shares in the event of a Change in Control,
which shares shall be issued on or about the execution and delivery of this
Agreement; and
(iii) Incentive
Cash/Restricted Stock.
Cash
and restricted shares of the Company’s Common Stock on an incentive basis, as
follows:
(A) 100%
of
Executive’s then base salary plus 100,000 shares of Common Stock in the event
that the Company achieves gross revenue for the fiscal year ending April 30,
2009 (annualized commencing as of the date of this Agreement) of not less than
$2,000,000, and EBITDA (as hereinafter defined) for such period of not less
than
$200,000; 50% of such cash and shares to be paid and issuable in the event
that
the gross revenue target is achieved, and the remaining 50% of such cash and
shares to be paid and issuable in the event that the EBITDA target is achieved,
such amounts to be pro
rated
for the
annualized nine-month period;
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(B) 100%
of
Executive’s then base salary plus 100,000 shares of Common Stock in the event
that the Company achieves gross revenue for the fiscal year ending April 30,
2010 of not less than $4,000,000, and EBITDA for such period of not less than
$400,000; 50% of such cash and shares to be paid and issuable in the event
that
the gross revenue target is achieved, and the remaining 50% of such cash and
shares to be paid and issuable in the event that the EBITDA target is
achieved;
(C) 100%
of
Executive’s then base salary plus 100,000 shares of Common Stock in the event
that the Company achieves gross revenue for the fiscal year ending April 30,
2011 of not less than $8,000,000, and EBITDA for such period of not less than
$800,000; 50% of such cash and shares to be paid and issuable in the event
that
the gross revenue target is achieved, and the remaining 50% of such cash and
shares to be paid and issuable in the event that the EBITDA target is
achieved;
(D) 100%
of
Executive’s then base salary plus 100,000 shares of Common Stock in the event
that the Company achieves gross revenue for the fiscal year ending April 30,
2012 of not less than $16,000,000, and EBITDA for such period of not less than
$1,600,000; 50% of such cash and shares to be paid and issuable in the event
that the gross revenue target is achieved, and the remaining 50% of such cash
and shares to be paid and issuable in the event that the EBITDA target is
achieved; and
(E) 100%
of
Executive’s then base salary plus 100,000 shares of Common Stock in the event
that the Company achieves gross revenue for the fiscal year ending April 30,
2013 of not less than $30,000,000, and EBITDA for such period of not less than
$3,000,000; 50% of such cash and shares to be paid and issuable in the event
that the gross revenue target is achieved, and the remaining 50% of such cash
and shares to be paid and issuable in the event that the EBITDA target is
achieved.
EBITDA
means, for any applicable period, earnings before provision for income taxes,
depreciation and amortization as determined in accordance with generally
accepted accounting principles consistently applied. All such cash and shares
of
incentive restrictive stock as set forth in (A), (B), (C), (D) and (E) above
shall be paid and/or issued by the Company to Executive, as the case may be,
as
soon as practicable after the relevant determinations of gross revenue and
EBITDA have been made, which such determinations shall be made by the
regularly-engaged accountants of the Company and be final and binding for all
purposes absent manifest error, gross negligence or willful misconduct. In
the
event of a Change in Control, any such incentive restrictive stock not yet
issued, and for which the applicable benchmarks have not yet been determined,
shall be immediately issued to Executive.
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(d) Vacation
and Sick Leave.
Executive shall be entitled to vacation time for each calendar year and such
paid sick leave as is in accordance with the normal Company policies and
practices in effect from time to time for senior executives but in no event
less
than four (4) weeks vacation; provided,
however,
that
unless otherwise approved in writing by the Board, no more than two weeks of
such vacation time may be used consecutively, and provided,
further,
that
any accrued but unused vacation time and paid sick leave remaining at the end
of
each calendar year shall be forfeited unless otherwise agreed to in writing
by
the Company and Executive.
(e) Other
Benefits.
During
the Employment Period, Executive shall be entitled to participate in the
employee benefit plans, programs and arrangements of the Company in effect
during the Employment Period which are generally available to senior executives
of the Company (including, without limitation, 401(k) and group medical
insurance plans), as well as an automobile allowance of $1,000 per month,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plans, programs and arrangements.
(f) Expenses.
In
addition to any amounts payable to Executive pursuant to this Section
3,
the
Company shall reimburse Executive, upon production of accounts and vouchers
or
other reasonable evidence of payment by Executive, all in accordance with the
Company’s regular procedures in effect from time to time, all reasonable and
ordinary expenses as shall have been incurred by him in the performance of
his
duties hereunder or other expenses agreed upon in writing by the Company and
Executive.
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4.
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Termination
of Employment.
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(a) Termination
for Cause.
The
Company may terminate Executive’s employment hereunder at any time for Cause.
For purposes of this Agreement, Cause shall mean:
(i) Executive’s
commission of (A) any violation of law, (B) any breach of fiduciary duty or
act
of negligence or malfeasance, or (C) any act of dishonesty, fraud or
misrepresentation;
(ii) Executive’s
commission of any other act of moral turpitude injurious to the Company, which
the Board in its sole discretion determines has or may be reasonably expected
to
have a detrimental impact on the Company’s business or operations or would
prevent Executive from effectively performing his duties under this
Agreement;
(iii) a
breach
by Executive of any obligations or covenants contained in this Agreement as
determined by the Board in its sole discretion; and
(iv) a
failure
by Executive to discharge his duties, responsibilities and obligations under
this Agreement, or a failure to follow the directives of the Board, as
determined by the Board in its sole discretion.
(b) Termination
Upon Death or Disability.
The
Employment Period shall be terminated upon the death or Disability (as defined
below) of Executive. "Disability"
shall mean that as a result of physical or mental illness, injury, infirmity
or
other incapacity as determined by a physician selected by the Board, Executive
is not able to substantially perform his duties and responsibilities to the
Company for a period of one hundred twenty (120) consecutive days or an
aggregate period of more than one hundred and eighty (180) days in any 12-month
period.
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5.
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Consequences
of Termination.
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(a) For
Cause, Death, Disability or Non-Renewal; By Executive.
In the
event of termination of Executive’s employment at any time (i) by the Company
for Cause, (ii) by Executive for any reason, (iii) by either party as a result
of a non-renewal in accordance with Section 1 hereof, or (iv) as a result of
death or Disability, Executive shall be entitled only to receive base salary
accrued but not paid through the date of termination, and the Company shall
have
no further obligations to Executive.
(b) Other
Termination.
In the
event of a termination of Executive’s employment for any reason other than as
set forth in Sections 5(a) or 5(c) hereof,
(i) the
Company shall provide to Executive base salary accrued but not paid through
the
date of termination plus, as severance, base salary for one year, payable over
time in accordance with the Company’s normal payroll practices, provided that,
in the
event such termination occurs after the end of the Initial Term, Executive
shall
be entitled only to receive base salary accrued but not paid through the date
of
termination; and
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(ii) Executive
shall provide to the Company an executed and non-revocable release agreement
in
favor of the Company and its shareholders and their respective directors,
officers and employees, in form and substance acceptable to the
Company.
(c) Change
in Control.
If at
any time during the Employment Period, Executive’s employment with the Company
is terminated by the Company as a result of a Change in Control (as hereinafter
defined), the Company shall pay to Executive an amount equal to 2.99
multiplied
by
Executive’s annualized salary that Executive is then earning, payable in a
lump-sum payment upon the closing of the Change in Control. For purposes hereof,
a Change in Control means the acquisition by any Person (as defined below)
of
beneficial ownership of securities of the Company representing greater than
50%
of the combined voting power of the Company’s then outstanding voting
securities. Person means any individual or entity (or group(s) thereof acting
together), which such individual or entity (or group thereof) is not a
beneficial owner of any of the Company’s securities as of the date of this
Agreement.
(d) Withholding
of Taxes.
All
payments required to be made by the Company to Executive under this Agreement
shall be subject to the withholding of such amounts, if any, relating to tax,
excise tax and other payroll deductions as the Company may reasonably determine
it should withhold pursuant to any applicable law or regulation.
(e) No
Other Obligations.
Except
for the obligations of the Company provided by this Agreement and by operation
of applicable law, the Company shall have no further obligations to Executive
upon his termination of employment.
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6.
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Indemnity.
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The
Company shall, during Executive’s employment with the Company and thereafter,
indemnify Executive to the fullest extent permitted by law and by its
Certificate of Incorporation and By-laws and shall assure that Executive is
covered by the Company’s D&O insurance policies, if available, and any other
insurance policies that protect employees as in effect from time to time. Such
insurance policies shall be with providers, and provide for coverage in amounts,
customary and reasonable within the industry in which the Company
operates.
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7.
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Restrictive
Covenants.
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(a) Proprietary
Information.
(i) Executive
agrees that all information and know-how, whether or not in writing, of a
private, secret or confidential nature concerning the business or financial
affairs of the Company or any Affiliates (as defined in Section 7(f) below)
is
and shall be the exclusive property of the Company or any Affiliates. Such
information and know-how shall include, but not be limited to, inventions,
products, processes, methods, techniques, formulas, compositions, compounds,
projects, developments, plans, research data, clinical data, financial data,
personnel data, computer programs, customer and supplier lists, client lists,
business plans, operational methods, pricing policies, marketing plans, sales
plans, identity of suppliers or vendors, trading positions, sales, profits
or
other financial or business information, in each case of or relating to the
business of the Company or any Affiliates (collectively, “Proprietary
Information”). Except in connection with, and on a basis consistent with, the
performance of his duties hereunder, Executive shall not disclose any
Proprietary Information to others outside the Company or any Affiliates or
use
the same for any unauthorized purposes without written approval by the Board,
either during or at any time after the Employment Period.
(ii) Executive
agrees that all files, letters, memoranda, reports, records, data, sketches,
drawings, laboratory notebooks, program listings, customer lists, customer
solicitations or other written, photographic, or other tangible material
containing Proprietary Information, whether created by Executive or others,
which shall come into his custody or possession, shall be and are the exclusive
property of the Company or any Affiliates to be used by Executive only in the
performance of his duties for the Company. Executive agrees to deliver to the
Company upon the expiration of the Employment Period all such material
containing Proprietary Information.
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(iii) Executive
agrees that his obligation not to disclose or use information, know-how and
records of the types set forth in paragraphs (i)
and
(ii)
above,
also extends to such types of information, know-how, records and tangible
property of customers of the Company or any Affiliates or suppliers to the
Company or any Affiliates or other third parties who may have disclosed or
entrusted the same to the Company or any Affiliates or to Executive in the
course of the Company’s business.
(iv) Notwithstanding
the foregoing, Proprietary Information shall not include information which
(A)
is or becomes generally available or known to the public, other than as a result
of any disclosure by Executive in violation hereof; or (B) is or becomes
available to Executive on a non-confidential basis from any source other than
the Company, other than any such source that is prohibited by a legal,
contractual, or fiduciary obligation to the Company from disclosing such
information.
(v) In
the
event that Executive is requested pursuant to, or becomes compelled by, any
applicable law, regulation, or legal process to disclose any Proprietary
Information, Executive shall provide the Company with prompt written notice
thereof so that the Company may seek a protective order or other appropriate
remedy or, in the Company’s sole and absolute discretion, waive compliance with
the terms hereof. In the event that no such protective order or other remedy
is
obtained, or the Company waives compliance with the terms hereof, Executive
shall furnish only that portion of such Proprietary Information which Executive
is advised by counsel in writing is legally required. Executive will cooperate
with the Company, at the Company’s sole cost and expense, in its efforts to
obtain reliable assurance that confidential treatment will be accorded such
Proprietary Information.
(b) Developments.
(i) Executive
shall make full and prompt disclosure to the Company of all inventions,
improvements, discoveries, methods, developments, software, and works of
authorship, whether patentable or not, which are created, made, conceived or
reduced to practice by Executive or under his direction or jointly with others
during the Employment Period, whether or not during normal working hours or
on
the premises of the Company or any Affiliates (collectively,
“Developments”).
(ii) Executive
agrees to assign and does hereby assign to the Company (or any entity designated
by the Company) all of his right, title and interest in and to all Developments
and all related patents, patent applications, copyrights, copyright
applications, trademark and trademark applications and other intellectual
property of any kind or nature. Executive also hereby waives all claims to
moral
rights in any Developments.
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(iii) Executive
agrees to cooperate fully with the Company or any Affiliates, both during and
after the Employment Period, with respect to the procurement, maintenance and
enforcement of copyrights and patents (both in the United States and foreign
countries) relating to Developments. Executive shall sign all papers, including,
without limitation, copyright applications, patent applications, declarations,
oaths, formal assignments, assignment of priority rights, and powers of
attorney, which the Company or any Affiliates may deem necessary or desirable
in
order to protect their rights and interests in any Development.
(c) Other
Agreements.
Executive represents that his performance of all the terms of this Agreement
and
as an employee of the Company does not and will not breach any agreement (i)
to
keep in confidence proprietary information, knowledge or data acquired by him
in
confidence or in trust prior to his employment with the Company, (ii) to refrain
from competing, directly or indirectly, with the business of his previous
employer or any other party, and (iii) to refrain from soliciting the employment
of any employees of any previous employer or any other party.
(d) Non-Competition
and Non-Solicitation.
During
any period of Executive’s employment hereunder and for a period of two (2) years
thereafter, Executive shall not engage (whether as an employee, consultant,
director, agent or independent contractor) in any Business Activities on behalf
of himself or any person, firm or entity, and Executive shall not acquire any
financial interest (except for equity interests in publicly-held companies
that
will not be significant and that, in any event, will not exceed one percent
(1%)
of the outstanding equity of such company) in any entity which engages in
Business Activities in the geographic area of the United States. During the
period that the above noncompetition restriction applies, Executive shall not,
without the written consent of the Company: (i) solicit any employee of the
Company or any Affiliates to terminate his employment, or (ii) solicit any
customers, partners, resellers, vendors or suppliers of the Company on behalf
of
any individual or entity other than the Company or its Affiliates. As used
herein, the term “Business Activities” shall mean any and all
business
activities of the Company and any Affiliates as presently conducted and/or
conducted for the past two (2) years.
(e) Enforcement.
The
Company shall be entitled to seek a restraining order or injunction in any
court
of competent jurisdiction to prevent any continuation of any violation of the
provisions of this Section 7.
(f) Affiliates.
For
purposes of this Agreement, Affiliates shall mean any individuals or entities
that directly or indirectly, through one or more intermediaries, controls,
are
controlled by or are under common control with the Company. For purposes of
this
definition, “control” means the power to direct the management and policies of
another, whether through the ownership of voting securities, by contract or
otherwise.
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8.
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Notices.
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Any
notice or other communication required or permitted to be given to any party
hereunder shall be in writing and shall be given to such party at such party’s
address set forth below or such other address as such party may hereafter
specify by notice in writing to the other party. Any such notice or other
communication shall be addressed as aforesaid and given by (a) certified mail,
return receipt requested, with first class postage prepaid, (b) hand delivery,
or (c) reputable overnight courier. Any notice or other communication will
be
deemed to have been duly given (i) on the fifth day after mailing, provided
receipt of delivery is confirmed, if mailed by certified mail, return receipt
requested, with first class postage prepaid, (ii) on the date of service if
served personally or (iii) on the business day after delivery to an overnight
courier service, provided receipt of delivery has been confirmed:
If
to the
Company, to:
Xxxxxx
Petroleum, Inc.
0000
Xxxxx Xxxxxxx
Xxxxxxxxxx,
Xxxxxxxxx 00000
Attention:
Xxxxx Xxxxxx, Chairman of the Board
with
a
copy to:
Snow
Xxxxxx Xxxxxx P.C.
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
| Attention: |
Xxxx
Xxxxxx, Esq.
|
Xxxxx
X.
Xxxxxxx, Esq.
If
to
Executive, as follows:
000
Xxxxxxx Xxxx Xxxx
Xxxxxxxxx,
Xxxxxxxxx 00000
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9.
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Non-Assignment;
Successors.
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Neither
party hereto may assign his or its rights or delegate his or its duties under
this Agreement without the prior written consent of the other party, provided
that, the Company may assign its rights hereunder to any affiliate or successor
entity. This Agreement shall inure to the benefit of and be binding upon the
heirs, assigns or designees of the parties hereto.
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10.
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Entire
Agreement.
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This
Agreement constitutes the entire agreement by the Company and Executive with
respect to the subject matter hereof and supersedes any and all prior agreements
or understandings between Executive and the Company with respect to the subject
matter hereof, whether written or oral.
8
| 11. |
Amendment
and Waiver.
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Any
term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), only by the written consent of all parties hereto. Any agreement
on the part of a party to any extension or waiver shall only be valid if set
forth in an instrument in writing signed on behalf of such party. Any such
waiver or extension shall not operate as waiver or extension of any other
subsequent condition or obligation.
| 12. |
Unenforceability,
Severability.
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If
any
provision of this Agreement is found to be void or unenforceable by a court
of
competent jurisdiction, the remaining provisions of this Agreement shall
nevertheless be binding upon the parties with the same force and effect as
though the unenforceable part had been severed and deleted.
| 13. |
Specific
Performance.
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The
parties hereto agree that irreparable damage would occur if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof, in
addition to any other remedy to which they are entitled at law or in
equity.
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14.
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Governing
Law.
|
This
Agreement shall be construed, interpreted and enforced in accordance with,
and
shall be governed by, the laws of the State of Tennessee applicable to contracts
made and to be performed wholly therein without giving effect to principles
of
conflicts or choice of laws thereof.
| 15. |
Jurisdiction.
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Each
of
the parties hereto hereby irrevocably consents and submits to the exclusive
jurisdiction of the state and federal courts located in Xxxxx County, Tennessee
in connection with any proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby and waives any objection to venue in
Xxxxx County, Tennessee. In addition, each of the parties hereto hereby waives
trial by jury in connection with any claim or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
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16.
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Counterparts.
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This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together will constitute one and
the
same instrument.
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first written above.
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By:
|
/s/ Xxxxx Xxxxxx |
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Name:
Xxxxx Xxxxxx
|
|
|
Title:
Chairman of the Board
|
|
| /s/ Xxxxx X. Xxxxxx | |
| Xxxxx X. Xxxxxx | |
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