EXHIBIT 10.36
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement dated as of July 26, 2004, is
between Xxxxx-Xxxxxxxx Corporation and Xxxxxx X. Xxxxx. Certain capitalized
terms used herein are defined in Section 1 below.
R E C I T A L S:
A. Company wishes to employ Executive, and Executive desires to accept
employment with Company, by entering into a written agreement to specify the
terms and conditions of Executive's continued employment with Company;
B. Executive is to be employed as Chief Financial Officer as of July
30, 2004 of Company, and shall be an integral member of its management team;
C. Company considers the maintenance of a sound management team,
including Executive, essential to protecting and enhancing its best interests
and those of its stockholders;
D. Company recognizes that the possibility of a change in control of
Company may result in the departure or distraction of management to the
detriment of Company and its stockholders; and
E. Company has determined that appropriate steps should be taken to
obtain and retain the continued attention and dedication of selected members of
Company's management team to their assigned duties without the distraction
arising from the possibility of a change in control of Company.
NOW, THEREFORE, in consideration of Executive's past and future
employment with Company and other good and valuable consideration, the parties
agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
will have the following meanings:
(a) AGREEMENT refers to the Executive Employment Agreement
represented by this document.
(b) CAUSE has the meaning ascribed to it in Section 7(a)(ii).
(c) CHANGE IN CONTROL means:
(i) The acquisition after the date hereof by any individual,
entity or group, or a Person (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) other than an Excluded
Person, of ownership of more than 50% of either: (i) the then
outstanding shares of Common Stock ("Outstanding Common Stock");
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors ("Outstanding Voting Securities");
(ii) Individuals who, as of the date hereof, constitute the
Board of Directors of the Company ("Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, as a member of the
Incumbent Board, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of
1934) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board;
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 50% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such reorganization, merger
or consolidation, in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger or
consolidation of the Outstanding Common Stock and Outstanding
Voting Securities, as the case may be, or at least a majority of
the members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation; or
(iv) Approval by the stockholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (1) more than
50% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election for directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
2
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of
the Outstanding Common Stock and Outstanding Voting Securities, as
the case may be; or (2) at least a majority of the members of the
board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other
disposition of assets of the Company.
(d) CODE means the Internal Revenue Code of 1986, as amended.
(e) COMMENCEMENT DATE has the meaning ascribed to it in Section 4.
(f) COMPANY means Xxxxx-Xxxxxxxx Corporation.
(g) CONFIDENTIAL INFORMATION has the meaning ascribed to it in
Section 9(b).
(h) CONSTRUCTIVELY TERMINATED with respect to an Executive's
employment with Company will be deemed to have occurred if Executive
terminates his employment within six months following the date on which
Company:
(i) demotes Executive to a lesser position, either in title
or responsibility, than the highest position held by Executive
with Company at any time during Executive's employment with
Company after the date hereof unless the Company reverses such
demotion within 30 days after receiving written notice of such
demotion from Executive;
(ii) decreases Executive's salary below the highest level in
effect at any time during Executive's employment with Company or
reduces Executive's benefits and perquisites below the highest
levels in effect at any time during Executive's employment with
Company (other than as a result of any amendment or termination of
any Executive or group or other executive benefit plan, which
amendment or termination is applicable to all executives of
Company or any reduction in benefits that Company cures within 30
days after receiving written notice of such reduction from
Executive);
(iii) requires Executive to relocate to a principal place of
business more than 50 miles from the principal place of business
occupied by Company on the date hereof, unless the Company
reverses such relocation within 30 days after receiving written
notice of Executive's intention to terminate his employment in
reliance on this Section;
(iv) is subject to a Change In Control, unless Executive
accepts employment with a successor to Company; or
3
(v) breaches any other material term of this Agreement which
is not cured by Company within 30 days after receiving notice of
such breach from Executive.
(i) DESIGNATED INDUSTRY has the meaning ascribed to it in Section
10(a)(i)(1).
(j) DETERMINATION has the meaning ascribed to such term in Section
1313(a) of the Code.
(k) DISABILITY with respect to Executive shall be deemed to exist
if he meets the definition of disability under the terms of the
Company's current long-term disability policy (or any replacement
long-term disability policy). Any refusal by Executive to submit to a
reasonable medical examination to determine whether Executive is so
disabled shall be deemed conclusively to constitute evidence of
Executive's disability.
(l) EXECUTIVE refers to Xxxxxx X. Xxxxx.
(m) EXCLUDED PERSON means any Person who beneficially owns more
than 10% of the outstanding shares of the Company's Common Stock at any
time prior to the date hereof and any person who acquires from Energy
Spectrum Partners LP shares constituting more than 10% of the
outstanding shares of the Company's Common Stock on the date of
acquisition.
(n) COMPANY refers collectively to the Company and its
subsidiaries and other affiliates.
(o) INCENTIVE PLAN means the Xxxxx-Xxxxxxxx Corporation 2003
Incentive Stock Plan, as amended from time to time.
(p) INVENTIONS has the meaning ascribed to it in Section 8(a).
(q) SALARY has the meaning ascribed to it in Section 5(a).
(r) SEPARATION PAYMENT PERIOD has the meaning ascribed to it in
Section 7(b)(ii).
(s) SEPARATION PAYMENTS has the meaning ascribed to it in Section
7(b)(ii).
SECTION 2. EMPLOYMENT. Company hereby employs Executive, and Executive
hereby accepts employment by Company, upon the terms and subject to the
conditions hereinafter set forth.
SECTION 3. DUTIES. Executive shall be employed as the Chief Financial
Officer of the Company. Executive agrees to devote substantially all of his
business time as is necessary to perform his duties attendant to his executive
position with Company. Executive shall be allowed to engage in other activities
as an investor as well as participate in activities of charitable organizations
of his choice so long as they do not materially interfere with his duties for
Company.
4
SECTION 4. TERM. The term of employment of Executive hereunder shall
commence on the date of this Agreement and terminate three years hence.
SECTION 5. COMPENSATION AND BENEFITS. In consideration for the services
of Executive hereunder, Company shall compensate Executive as follows (except as
set forth herein, Executive acknowledges payment in full of all amounts due to
him for services rendered prior to the date hereof):
(a) SALARY. Company shall pay Executive, semi-monthly in arrears
with its normal payroll procedures, a salary which is equivalent to an
annual rate of $240,000 (the "Salary"). The Salary may not be decreased
at any time during the term of Executive's employment hereunder and
shall be reviewed no less than annually by Company. Any increase in the
Salary shall be in the sole discretion of the Compensation Committee of
the Board of Directors of the Company.
(b) MANAGEMENT INCENTIVE BONUS. Executive shall be entitled to
receive a bonus equal to a maximum of 50% of his Salary based upon the
achievement of goals set forth in Schedule A attached hereto (which
shall be amended each year in the discretion of the Company). Such
bonus shall be paid annually within 30 days after the completion of the
Company's audited financial statements for each year. Executive shall
also be eligible to receive from Company such annual management
incentive bonuses as may be provided in management incentive bonus
plans adopted from time to time by Company.
(c) STOCK OPTIONS In addition, the Compensation Committee of the
Company has approved and recommended that the Board of Directors
approve the grant to Executive of options to purchase 50,000 shares of
the Company's Common Stock pursuant to the Incentive Plan. The exercise
price for the options shall be equal to the fair market value of the
Company's Common Stock on the date the options are approved by the
Board of Directors, and the options shall vest and become exercisable
as follows: one-third (16,666 2/3) shall vest on the date of grant and
one-third (16,666 2/3) shall vest on each of August 1, 2005 and August
1, 2006 (provided Executive is employed by the Company on such dates).
(d) VACATION. Executive shall be entitled to three (3) weeks paid
vacation per year. Unless otherwise approved by the Compensation
Committee of the Board of Directors of the Company, a maximum of ten
days accrued vacation not taken in any calendar year shall be carried
forward and may be used in the next subsequent calendar year. Executive
shall schedule his paid vacation to be taken at times which are
reasonably and mutually convenient to both Company and Executive.
(e) INSURANCE BENEFITS. Company shall provide accident, health,
dental, disability and life insurance for Executive under the group
accident, health, dental, disability and life insurance plans as may be
maintained by Company for its full-time, salaried Executives from time
to time.
5
(f) OFFICE SPACE AND EXPENSES. Company shall provide and pay the
expenses of maintaining an office for Executive during the term of this
Agreement.
(g) ASSISTANT EXPENSES. Company shall assume and pay all salary
and benefits of an Assistant to Executive.
SECTION 6. EXPENSES. The parties anticipate that in connection with the
services to be performed by Executive pursuant to the terms of this Agreement,
Executive will be required to make payments for travel, entertainment of
business associates and similar expenses. Company shall reimburse Executive for
all reasonable expenses of types authorized by Company and incurred by Executive
in the performance of his duties hereunder, consistent with past practices.
Executive shall comply with such reporting requirements with respect to expenses
as Company may establish from time to time.
SECTION 7. TERMINATION.
(a) GENERAL. Executive's employment hereunder shall commence on
the Commencement Date and continue until the end of the term specified
in Section 4, except that the employment of Executive hereunder shall
terminate prior to such time in accordance with the following:
(i) DEATH OR DISABILITY. Upon the death of Executive during
the term of his employment hereunder or, at the option of Company,
in the event of Executive's Disability, upon 30 days' notice to
Executive.
(ii) FOR CAUSE. For "Cause" immediately upon written notice
by Company to Executive. A termination shall be for Cause if:
(1) Executive commits a criminal act involving
dishonesty or moral turpitude; or
(2) Executive commits a material breach of any of the
covenants, terms and provisions hereof or fails to obey
written directions delivered to Executive by the Company's
President or Chief Executive Officer which are not
inconsistent with Executive's rights under this Agreement.
(iii) WITHOUT CAUSE. Without Cause upon notice by the Board
of Directors to Executive or upon notice by Executive to the Board
if Executive has been Constructively Terminated.
(b) SEVERANCE PAY.
6
(i) TERMINATION UPON DEATH OR DISABILITY OR FOR CAUSE.
Executive shall not be entitled to any severance pay or other
compensation upon termination of his employment pursuant to
Section 7(a)(i) or (ii) except for his Salary earned but unpaid as
of the date of termination, unpaid expense reimbursements under
Section 6 for expenses incurred in accordance with the terms
hereof prior to termination, and compensation for accrued, unused
vacation as of the date of termination.
(ii) TERMINATION WITHOUT CAUSE. In the event Executive's
employment hereunder is terminated pursuant to Section 7(a)(iii),
Company shall pay Executive Separation Payments as Executive's
sole remedy in connection with such termination. "Separation
Payments" are payments made at the semi-monthly rate of
Executive's then current salary in effect immediately preceding
the date of termination. Separation Payments shall be made for the
lesser of one year following termination of employment or the
remaining term of this Agreement (the "Separation Payment
Period"), and shall be paid by Company in equal semi-monthly
payments in arrears or in accordance with its then-current normal
payroll procedure, provided that Company's obligation to make
Separation Payments shall be reduced by any amounts earned by
Executive for services during the Separation Payment Period.
Company shall also pay Executive his Salary earned but unpaid as
of the date of termination, unpaid expense reimbursements under
Section 6 for expenses incurred in accordance with the terms
hereof prior to termination, and compensation for accrued, unused
vacation as of the date of termination.
SECTION 8. INVENTIONS; ASSIGNMENT.
(a) INVENTIONS DEFINED. All rights to discoveries, inventions,
improvements, designs and innovations (including all data and records
pertaining thereto) that relate to the business of Company, whether or
not patentable, copyrightable or reduced to writing, that Executive may
discover, invent or originate during the term of his employment
hereunder, and for a period of six months thereafter, either alone or
with others and whether or not during working hours or by the use of
the facilities of Company ("Inventions"), shall be the exclusive
property of Company. Executive shall promptly disclose all Inventions
to Company, shall execute at the request of Company any assignments or
other documents Company may deem necessary to protect or perfect its
rights therein, and shall assist Company, at Company's expense, in
obtaining, defending and enforcing Company's rights therein. Executive
hereby appoints Company as his attorney-in-fact to execute on his
behalf any assignments or other documents deemed necessary by Company
to protect or perfect its rights to any Inventions.
(b) COVENANT TO ASSIGN AND COOPERATE. Without limiting the
generality of the foregoing, Executive hereby assigns and transfers to
Company the world-wide right, title and interest of Executive in the
Inventions. Executive agrees that Company may apply for and receive
patent rights (including Letters Patent in the United States) for the
Inventions in Company's name in such countries as may be determined
solely by Company. Executive shall communicate to Company all facts
known to Executive relating to the Inventions and shall cooperate with
Company's reasonable requests in connection with vesting title to the
Inventions and related patents exclusively in Company and in connection
with obtaining, maintaining and protecting Company's exclusive patent
rights in the Inventions.
7
(c) SUCCESSORS AND ASSIGNS. Executive's obligations under this
Section 8 shall inure to the benefit of Company and its successors and
assigns and shall survive the expiration of the term of this Agreement
for such time as may be necessary to protect the proprietary rights of
Company in the Inventions.
SECTION 9. CONFIDENTIAL INFORMATION.
(a) ACKNOWLEDGMENT OF PROPRIETARY INTEREST. Executive acknowledges
the proprietary interest of Company in all Confidential Information.
Executive agrees that all Confidential Information learned by Executive
during his employment with Company or otherwise, whether developed by
Executive alone or in conjunction with others or otherwise, is and
shall remain the exclusive property of Company. Executive further
acknowledges and agrees that his disclosure of any Confidential
Information will result in irreparable injury and damage to Company.
(b) CONFIDENTIAL INFORMATION DEFINED. "Confidential Information"
means all confidential and proprietary information of Company,
including without limitation (i) information derived from reports,
investigations, experiments, research and work in progress, (ii)
methods of operation, (iii) market data, (iv) proprietary computer
programs and codes, (v) drawings, designs, plans and proposals, (vi)
marketing and sales programs, (vii) client lists, (viii) historical
financial information and financial projections, (ix) pricing formulae
and policies, (x) all other concepts, ideas, materials and information
prepared or performed for or by Company and (xi) all information
related to the business, products, purchases or sales of Company or any
of its suppliers and customers, other than information that is publicly
available.
(c) COVENANT NOT TO DIVULGE CONFIDENTIAL INFORMATION. Company is
entitled to prevent the disclosure of Confidential Information. As a
portion of the consideration for the employment of Executive and for
the compensation being paid to Executive by Company, Executive agrees
at all times during the term of his employment hereunder and thereafter
to hold in strict confidence and not to disclose or allow to be
disclosed to any person, firm or corporation, other than to his
professional advisors (who have the obligation to maintain the
confidentiality of such information) and to persons engaged by Company
to further the business of Company, and not to use except in the
pursuit of the business of Company, the Confidential Information,
without the prior written consent of Company.
(d) RETURN OF MATERIALS AT TERMINATION. In the event of any
termination or cessation of his employment with Company for any reason,
Executive shall promptly deliver to Company all documents, data and
other information derived from or otherwise pertaining to Confidential
Information. Executive shall not take or retain any documents or other
information, or any reproduction or excerpt thereof, containing or
pertaining to any Confidential Information.
8
SECTION 10. NONCOMPETITION.
(a) Until termination of Executive's employment hereunder,
Executive shall not do any of the following:
(i) engage directly or indirectly, alone or as a shareholder,
partner, director, officer, Executive of or consultant to any
other business organization, in any business activities that:
(1) relate to the oil and gas drilling services industry
(the "Designated Industry"); or
(2) were either conducted by Company prior to the
termination of Executive's employment hereunder or proposed
to be conducted by Company at the time of such termination;
(ii) approach any customer or supplier of Company in an
attempt to divert it to any competitor of Company in the
Designated Industry; or
(iii) solicit or encourage any employee or Executive of
Company to end his relationship with Company or commence any such
relationship with any competitor of Company.
(b) Executive's noncompetition obligations hereunder shall not
preclude Executive from owning less than five percent of the common
stock of any publicly traded corporation conducting business activities
in the Designated Industry. If at any time the provisions of this
Section 10 are determined to be invalid or unenforceable by reason of
being vague or unreasonable as to area, duration or scope of activity,
this Section 10 shall be considered divisible and shall be immediately
amended to only such area, duration and scope of activity as shall be
determined to be reasonable and enforceable by the court or other body
having jurisdiction over the matter, and Executive agrees that this
Section 10 as so amended shall be valid and binding as though any
invalid or unenforceable provision had not been included herein.
SECTION 11. GENERAL.
(a) NOTICES. All notices and other communications hereunder shall
be in writing or by written telecommunication, and shall be deemed to
have been duly given upon delivery if delivered personally or via
written telecommunication, or five days after mailing if mailed by
certified mail, return receipt requested or by written
telecommunication, to the relevant address set forth below, or to such
other address as the recipient of such notice or communication shall
have specified to the other party in accordance with this Section
11(a):
9
If to Company, to: with a copy to:
Xxxxx-Xxxxxxxx Corporation Xxxxxx X. Xxxxxxxx
0000 Xxxxxxx, Xxxxx 000 Xxxxxx Xxxxxxxxx Xxxxx & Xxxxxxxx LLP
Xxxxxxx, Xxxxx 00000 0000 00xx Xxxxxx, Xxxxx 0000 Xxxxx
Xxxxx Xxxxxx, XX 00000
If to Executive, to the last address for Executive appearing on the
Company's records
(b) WITHHOLDING. All payments required to be made to Executive by
Company under this Agreement shall be subject to the withholding of
such amounts, if any, relating to federal, state and local taxes as may
be required by law.
(c) EQUITABLE REMEDIES. Each of the parties hereto acknowledges
and agrees that upon any breach by Executive or Company of his or its
obligations hereunder, Company and Executive shall have no adequate
remedy at law and accordingly shall be entitled to specific performance
and other appropriate injunctive and equitable relief.
(d) SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully
severable, and this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision never comprised a part
hereof, and the remaining provisions hereof shall remain in full force
and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall
be added automatically as part of this Agreement a provision as similar
in its terms to such illegal, invalid or unenforceable provision as may
be possible and be legal, valid and enforceable.
(e) WAIVERS. No delay or omission by either party in exercising
any right, power or privilege hereunder shall impair such right, power
or privilege, nor shall any single or partial exercise of any such
right, power or privilege preclude any further exercise thereof or the
exercise of any other right, power or privilege.
(f) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
(g) 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.
(h) REFERENCE TO AGREEMENT. Use of the words "herein," "hereof,"
"hereto," "hereunder" and the like in this Agreement refer to this
Agreement only as a whole and not to any particular section or
subsection of this Agreement, unless otherwise noted.
10
(i) BINDING AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the parties and shall be enforceable by the
personal representatives and heirs of Executive and the successors and
assigns of Company. This Agreement may be assigned by the Company or
any Company to any Company or, subject to Section 7(b)(iii), to any
successor to all or substantially all of the Company's business as a
result of a merger, consolidation, sale of stock or assets, or similar
transaction; provided that in the event of any such assignment, the
Company shall remain liable for all of its obligations hereunder and
shall be liable for all obligations of all such assignees hereunder. If
Executive dies while any amounts would still be payable to him
hereunder, such amounts shall be paid to Executive's estate. This
Agreement is not otherwise assignable by Executive.
(j) ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and may not be
amended except by a written instrument hereafter signed by each of the
parties hereto.
(k) GOVERNING LAW. This Agreement and the performance hereof shall
be construed and governed in accordance with the laws of the State of
Texas, without regard to its choice of law principles.
(l) GENDER AND NUMBER. The masculine gender shall be deemed to
denote the feminine or neuter genders, the singular to denote the
plural, and the plural to denote the singular, where the context so
permits.
EXECUTED as of the date and year first above written.
Xxxxx-Xxxxxxxx Corporation
By /s/ Xxxxxxx X. Xxxxxxxxxxxx
------------------------------------------------
Xxxxxxx X. Xxxxxxxxxxxx, Chief Executive Officer
EXECUTIVE
/s/ Xxxxxx X. Xxxxx
-------------------
Xxxxxx X. Xxxxx
11
SCHEDULE A
BONUS CALCULATION
Executive's bonus shall be based upon the performance of his duties as Chief
Financial Officer and in particular his leadership ability to enable the Company
to meet the following goals:
1. Maintain covenant compliance on bank lines of credit
2. Implement Xxxxxxxx-Xxxxx including implementation of internal controls by
June 30, 2005
3. Install internal controls verifying performance by JV partner's contractual
obligations in Mexico
4. Meeting EBITDA and income targets
5. Maintain target debt to equity ratios
6. Obtain debt and equity financing for acquisitions
7. Increase operating margins
12
