UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 11, 2016
EXTRACTION OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
Delaware |
001- 37907 |
46-1473923 |
(State or Other Jurisdiction |
(Commission |
(IRS Employer |
370 17th Street, Suite 5300
Denver, Colorado 80202
(Address of Principal Executive Offices)
(720) 557-8300
(Registrants Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
Underwriting Agreement
On October 11, 2016, Extraction Oil & Gas, Inc., a Delaware corporation (the Company), entered into an Underwriting Agreement (the Underwriting Agreement) with Credit Suisse Securities (USA) LLC, Barclays Capital Inc. and Goldman, Sachs & Co., as representatives of the several underwriters named therein (the Underwriters), relating to the offer and sale of the Companys common stock, par value $0.01 per share (the Common Stock). The Underwriting Agreement provides for the offer and sale (the Offering) of 33,333,333 shares of Common Stock at a price to the public of $19.00 per share ($17.955 per share net of underwriting discounts and commissions). Pursuant to the Underwriting Agreement, the Company has granted the Underwriters a 30-day option to purchase up to an aggregate of 5,000,000 additional shares of Common Stock (the Option Shares). The material terms of the Offering are described in the prospectus, dated October 11, 2016 (the Prospectus), filed by the Company with the Securities and Exchange Commission (the Commission) on October 13, 2016, pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act). The Offering is registered with the Commission pursuant to a Registration Statement on Form S-1, as amended (File No. 333- 213634), initially filed by the Company on September 14, 2016 (the Registration Statement).
The Underwriting Agreement contains customary representations and warranties, agreements and obligations, closing conditions and termination provisions. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the Underwriters may be required to make because of any of those liabilities.
The Offering is expected to close on October 17, 2016, subject to the satisfaction of customary closing conditions, and the Company expects to receive proceeds from the Offering of approximately $594.1 million (net of underwriting discounts, commissions and estimated offering expenses payable by the Company), assuming no exercise of the Underwriters option to purchase the Option Shares. As described in the Prospectus, the Company intends to use (i) $90.0 million of the net proceeds from the Offering to redeem in full certain of its convertible preferred securities and (ii) $291.6 million to repay borrowings under its revolving credit facility. The Company will use the remaining net proceeds of $212.5 million for general corporate purposes, including to fund its 2016 and 2017 capital expenditures.
The foregoing description is qualified in its entirety by reference to the full text of the Underwriting Agreement, which is attached as Exhibit 1.1 to this Current Report on Form 8-K and incorporated into this Item 1.01 by reference.
Relationships
As more fully described under the caption Underwriting (Conflicts of Interest) in the Prospectus, certain of the Underwriters and their respective affiliates have in the past, and may in the future, perform investment banking, commercial banking, advisory and other services for the Company and its affiliates from time to time for which they have received, and may in the future receive, customary fees and expenses.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Directors
(d) On October 11, 2016, the Board of Directors of the Company (the Board) appointed Marvin M. Chronister and Patrick D. OBrien as members of the Board, effective simultaneous with the effectiveness of the Registration Statement.
Messrs. Chronister and OBrien are expected to each receive 75,000 restricted stock units (RSUs) under the Extraction Oil & Gas, Inc. 2016 Long-Term Incentive Plan (the LTIP) in connection with the closing of the Offering. The restricted stock units will vest in full after one year of continuous service as a director. Upon vesting, each RSU will entitle the holder to receive one share of the Common Stock of the Company. The foregoing description of the RSU awards is not complete and is qualified in its entirety by reference to the full text of the form
of Restricted Stock Unit Award Agreement (for Directors), which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated into this Item 5.02 by reference.
A fulsome description of the other compensation Messrs. Chronister and OBrien will receive following the consummation of the Offering is contained in the section of the Prospectus entitled Executive Compensation and is incorporated herein by reference.
In connection with the closing of the Offering, the Company will enter into Indemnification Agreements with each of Messrs. Chronister and OBrien. A description of the Indemnification Agreements is contained in the section of the Prospectus entitled Description of Capital StockLimitation of Liability and Indemnification Matters and is incorporated herein by reference.
There are no arrangements or understandings between either Messrs. Chronister or OBrien and any other person pursuant to which he was selected as a director. Neither Messrs. Chronister nor OBrien has any family relationship with any director or executive officer of the Company or any person nominated or chosen by the Company to become a director or executive officer. There are no transactions in which either Messrs. Chronister or OBrien has an interest requiring disclosure under Item 404(a) of Regulation S-K.
Following the closing of the Offering, Mr. Chronister is expected to serve on the Boards Audit Committee and Compensation Committee, and Mr. OBrien is expected to serve on the Boards Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Executive Committee.
Extraction Oil & Gas, Inc. 2016 Long-Term Incentive Plan
(e) On October 11, 2016, the Board adopted the LTIP, effective immediately prior to the effectiveness of the Registration Statement, for the benefit of the employees, consultants and directors of the Company and its affiliates. The LTIP provides for the grant of all or any of stock options, stock appreciation rights, restricted stock, RSUs, bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards and performance awards. Subject to adjustment in accordance with the terms of the LTIP, 20,200,000 shares of Common Stock have been reserved for issuance pursuant to awards under the LTIP. Common Stock withheld to satisfy exercise prices or tax withholding obligations will again be available for delivery pursuant to other awards. The LTIP will be administered by the Board or a committee thereof. The LTIP will be administered by the Board or an alternative committee appointed by the Board. The administrator of the LTIP, at its discretion, may terminate the LTIP at any time with respect to the shares for which a grant has not previously been made. The LTIP will expire on the tenth anniversary of the date of its adoption.
The foregoing description of the LTIP is not complete and is qualified in its entirety by reference to the full text of the LTIP, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated into this Item 5.02 by reference.
Stock Option Awards
(e) In connection with the Offering and pursuant to the LTIP, the Board granted 1,500,000 stock options to each of Messrs. Mark A. Erickson, Matthew R. Owens and Russell T. Kelley, Jr. on October 11, 2016, effective immediately following the effectiveness of the Registration Statement. Each option entitles the recipient to purchase one share of Common Stock. The exercise price of the options equals the public offering price of the Common Stock. Subject to accelerated vesting upon certain specified events, a third of the options will vest each year. The foregoing description of the option awards granted to our executive officers is not complete and is qualified in its entirety by reference to the full text of the form of the Stock Option Award Agreement, which is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated into this Item 5.02 by reference.
Employment Agreements
(e) In connection with the Offering, the Company entered into employment agreements with each of Messrs. Erickson, Owens and Kelley (each, the Executive and, collectively, the Executives), effective on October 11, 2016 immediately prior to the effectiveness of the Registration Statement (the Employment Agreements). Each of the Employment Agreements includes an initial term of three years, subject to termination upon notice or certain
other conditions, and automatically extends for an additional one-year period every year thereafter unless the Company or the Executive gives written notice that the automatic extension will not occur within 90 days prior to the end of the initial term, or, if applicable, the current extension term. Pursuant to the terms of the Employment Agreements, the annual base salary for each of the Executives is $450,000, and each Executive is entitled to (1) a target annual bonus opportunity at targeted levels of performance equal to a minimum specified percentage of the Executives annual base salary, which for Mr. Erickson is 150% and for Messrs. Owens and Kelley is 100%, and (2) an annual performance-based equity award with an expected target grant date fair value equal to a specified percentage of the Executives annual base salary, which for Mr. Erickson is 150% and for Messrs. Owens and Kelley is 100%.
If the Executives employment is terminated by the Company for any reason other than cause or the Executives death or disability, or if the Executive terminates employment for good reason, or if the Executives employment terminates due to non-extension of the Employment Agreement by the Company (the terms cause, disability, and good reason, as defined in the applicable Employment Agreement), then, subject to the Executives timely execution and non-revocation of a release of claims, the Executive will be entitled to receive the following from the Company (1) any earned but unpaid annual bonus for the calendar year ending prior to the date of termination; (2) an annual bonus for the year in which the termination occurs equal to the greater of the annual bonus for the immediately preceding year or the target bonus for the current year, in either case, pro-rated through the date of termination (and provided that if such annual bonus was intended to constitute performance-based compensation under section 162(m) of the Internal Revenue Code (the Code), then the pro-rated annual bonus for the year of termination shall instead be based on the Companys actual performance for such year and only to the extent the applicable performance criteria have been satisfied as certified by a committee of the Board as required under section 162(m) of the Code); (3) a lump sum payment equal to, for Messrs. Erickson and Owens, two times (or three times, in the event such termination of employment occurs within the 12-month period following the occurrence of a change in control, as such term is defined in the Employment Agreement (the Protection Period)), and for Mr. Kelley, 1.5 times (or two times, in the event such termination of employment occurs during the Protection Period) the sum of (a) the Executives annual base salary at the time of termination, and (b) the average annual bonus for the prior two years preceding the date of termination; (4) for a period of up to 18 months following termination, reimbursement on a monthly basis of the portion of the premiums paid by the Executive to continue coverage under the Companys group health plans under COBRA that exceeds the employee premium amount that similarly situated active employees of the Company pay for the same or similar coverage under such plans; and (5) accelerated time-based vesting of all outstanding equity-related awards held by the Executive (with any performance-based vesting being determined based on actual performance through the end of the performance period) and continued exercise rights under all options, stock appreciation rights, and similar awards for the full original term of the award.
The foregoing description is qualified in its entirety by reference to the full text of the Employment Agreements for each of Messrs. Erickson, Owens and Kelley, which are filed as Exhibits 10.4, 10,5, and 10.6, respectively, to this Current Report on Form 8-K and are incorporated into this Item 5.02 by reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Changes in Fiscal Year.
Certificate of Incorporation
On October 11, 2016, prior to the effectiveness of the Registration Statement, the Company converted from a Delaware limited liability company to a Delaware corporation (the Conversion). In connection with the Conversion, the Company filed its Certificate of Incorporation (the Certificate of Incorporation) with the Secretary of State of the State of Delaware on October 11, 2016. A description of the Certificate of Incorporation is contained in the section of the Prospectus entitled Description of Capital Stock and is incorporated herein by reference.
The foregoing description and the description contained in the Prospectus are qualified in their entirety by reference to the full text of the Certificate of Incorporation, which is filed as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated into this Item 5.03 by reference.
Bylaws
On October 11, 2016, in connection with the Conversion, the Company adopted its Bylaws (the Bylaws). A description of the Bylaws is contained in the section of the Prospectus entitled Description of Capital Stock and is incorporated herein by reference.
The foregoing description and the description contained in the Prospectus are qualified in their entirety by reference to the full text of the Bylaws, which is filed as Exhibit 3.2 to this Current Report on Form 8-K and is incorporated into this Item 5.03 by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. |
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Description | |
1.1 |
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Underwriting Agreement, dated as of October 11, 2016, by and among Extraction Oil & Gas, Inc. and Credit Suisse Securities (USA) LLC, Barclays Capital Inc. and Goldman, Sachs & Co., as representatives of the several underwriters named therein. |
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3.1 |
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Certificate of Incorporation of Extraction Oil & Gas, Inc. |
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3.2 |
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Bylaws of Extraction Oil & Gas, Inc. |
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10.1 |
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Extraction Oil & Gas, Inc. 2016 Long-Term Incentive Plan (incorporated by reference to Exhibit 4.4 to the Companys Registration Statement on Form S-8 (File No. 333- 214089) filed with the Commission on October 13, 2016). |
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10.2 |
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Form of Restricted Stock Unit Award Agreement (for Directors) (incorporated by reference to Exhibit 4.6 to the Companys Registration Statement on Form S-8 (File No. 333- 214089) filed with the Commission on October 13, 2016). |
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10.3 |
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Form of Stock Option Award Agreement (incorporated by reference to Exhibit 4.7 to the Companys Registration Statement on Form S-8 (File No. 333-214089) filed with the Commission on October 13, 2016). |
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10.4 |
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Employment Agreement dated as of October 11, 2016 among the Company, XOG Services, LLC, and Mark A. Erickson. |
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10.5 |
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Employment Agreement dated as of October 11, 2016 among the Company, XOG Services, LLC, and Matthew R. Owens. |
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10.6 |
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Employment Agreement dated as of October 11, 2016 among the Company, XOG Services, LLC, and Russell T. Kelley, Jr. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: October 14, 2016 |
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EXTRACTION OIL & GAS, INC. | |
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By: |
/s/ Russell T. Kelley, Jr. |
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Russell T. Kelley, Jr. |
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Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
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Description | |
1.1 |
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Underwriting Agreement, dated as of October 11, 2016, by and among Extraction Oil & Gas, Inc. and Credit Suisse Securities (USA) LLC, Barclays Capital Inc. and Goldman, Sachs & Co., as representatives of the several underwriters named therein. |
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3.1 |
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Certificate of Incorporation of Extraction Oil & Gas, Inc. |
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3.2 |
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Bylaws of Extraction Oil & Gas, Inc. |
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10.1 |
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Extraction Oil & Gas, Inc. 2016 Long-Term Incentive Plan (incorporated by reference to Exhibit 4.4 to the Companys Registration Statement on Form S-8 (File No. 333- 214089) filed with the Commission on October 13, 2016). |
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10.2 |
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Form of Restricted Stock Unit Award Agreement (for Directors) (incorporated by reference to Exhibit 4.6 to the Companys Registration Statement on Form S-8 (File No. 333- 214089) filed with the Commission on October 13, 2016). |
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10.3 |
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Form of Stock Option Award Agreement (incorporated by reference to Exhibit 4.7 to the Companys Registration Statement on Form S-8 (File No. 333-214089) filed with the Commission on October 13, 2016). |
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10.4 |
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Employment Agreement dated as of October 11, 2016 among the Company, XOG Services, LLC, and Mark A. Erickson. |
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10.5 |
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Employment Agreement dated as of October 11, 2016 among the Company, XOG Services, LLC, and Matthew R. Owens. |
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10.6 |
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Employment Agreement dated as of October 11, 2016 among the Company, XOG Services, LLC, and Russell T. Kelley, Jr. |
Exhibit 1.1
33,333,333 Shares
EXTRACTION OIL & GAS, INC.
Common Stock
UNDERWRITING AGREEMENT
October 11, 2016
CREDIT SUISSE SECURITIES (USA) LLC
BARCLAYS CAPITAL INC.
GOLDMAN, SACHS & CO.
As Representatives of the Several Underwriters
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue,
New York, New York 10010-3629
c/o Barclays Capital Inc.
745 Seventh Avenue
New York, New York 10019
c/o Goldman, Sachs & Co.
200 West Street
New York, New York 10282-2198
Dear Sirs:
1. Introductory. Extraction Oil & Gas, Inc., a Delaware corporation (the Company), agrees with Credit Suisse Securities (USA) LLC (Credit Suisse), Barclays Capital Inc. (Barclays) and Goldman, Sachs & Co. (Goldman Sachs and, collectively with Credit Suisse and Barclays, the Representatives), as representatives of the several Underwriters named in Schedule A hereto (Underwriters), to issue and sell to the several Underwriters 33,333,333 shares of its common stock (Securities) (such 33,333,333 shares of Securities being hereinafter referred to as the Firm Securities). The Company also agrees to sell to the Underwriters, at the option of the Underwriters, an aggregate of not more than 5,000,000 additional shares of its Securities (the Optional Securities) as set forth below. The Firm Securities and the Optional Securities are herein collectively called the Offered Securities. As part of the offering contemplated by this Agreement, Wells Fargo Securities, LLC (Wells Fargo) has agreed to reserve out of the Firm Securities purchased by it under this Agreement, up to 1,666,667 shares for sale to the Companys directors, officers, employees and other parties associated with the Company (collectively, Participants), as set forth in the Final Prospectus (as defined herein) under the heading Underwriting (Conflicts of Interest) (the Directed Share Program). The Firm Securities to be sold by Wells Fargo pursuant to the Directed Share Program (the Directed Shares) will be sold by Wells Fargo pursuant to this Agreement at the public offering price. Any Directed Shares not subscribed for by the end of the business day on which this Agreement is executed will be offered to the public by the Underwriters as set forth in the Final Prospectus.
The Company hereby confirms its engagement of Goldman Sachs as, and Goldman Sachs hereby confirms its agreement with the Company to render services as, the qualified independent underwriter within the meaning of Rule 5121(f)(12) of the Financial Industry Regulatory Authority, Inc. (FINRA) with
respect to the offering and sale of the Offered Securities. Goldman Sachs, solely in its capacity as the qualified independent underwriter and not otherwise, is referred to herein as the QIU.
It is understood and agreed to by all parties that concurrently with, or prior to, making the proposed issuance and sale of the Offered Securities (the Offering), the Company, will enter into certain corporate reorganization transactions (the Reorganization Transactions), pursuant to which the following transactions will occur:
(a) The Company will convert form a Delaware limited liability company into a Delaware corporation; and
(b) Extraction Oil & Gas Holdings, LLC, a Delaware limited liability company (Holdings) will merge with and into the Company, and the Company will be the surviving entity to the merger. Holdings equityholders, other than the holders of Holdings Series B Preferred Units, will receive an aggregate of 108,460,231 Securities based on the relative levels of ownership in Holdings with the allocation of such Securities to be later determined by reference to an implied valuation of the Company based on the 10-day volume weighted average trading price of the Securities, pursuant to and in accordance with Holdings Third Amended and Restated Limited Liability Company Agreement and that certain Stakeholders Agreement by and between the Company, Holdings and certain equityholders of Holdings.
2. Representations and Warranties of the Company. (a) The Company represents and warrants to, and agrees with, the several Underwriters that:
(a) Filing and Effectiveness of Registration Statement; Certain Defined Terms. The Company has filed with the Commission a registration statement on Form S-1 (No. 333-213634) covering the registration of the Offered Securities under the Act, including a related preliminary prospectus or prospectuses. At any particular time, this initial registration statement, in the form then on file with the Commission, including all information contained in the registration statement (if any) pursuant to Rule 462(b) and then deemed to be a part of the initial registration statement, and all 430A Information and all 430C Information, that in any case has not then been superseded or modified, shall be referred to as the Initial Registration Statement. The Company may also have filed, or may file with the Commission, a Rule 462(b) registration statement covering the registration of Offered Securities. At any particular time, this Rule 462(b) registration statement, in the form then on file with the Commission, including the contents of the Initial Registration Statement incorporated by reference therein and including all 430A Information and all 430C Information, that in any case has not then been superseded or modified, shall be referred to as the Additional Registration Statement.
As of the time of execution and delivery of this Agreement, the Initial Registration Statement has been declared effective under the Act and is not proposed to be amended. Any Additional Registration Statement has or will become effective upon filing with the Commission pursuant to Rule 462(b) and is not proposed to be amended. The Offered Securities all have been or will be duly registered under the Act pursuant to the Initial Registration Statement and, if applicable, the Additional Registration Statement.
For purposes of this Agreement:
430A Information, with respect to any registration statement, means information included in a prospectus and retroactively deemed to be a part of such registration statement pursuant to Rule 430A(b).
430C Information, with respect to any registration statement, means information included in a prospectus then deemed to be a part of such registration statement pursuant to Rule 430C.
Act means the Securities Act of 1933, as amended.
Applicable Time means 4:45 P.M. (Eastern time) on the date of this Agreement.
Closing Date has the meaning defined in Section 3 hereof.
Commission means the Securities and Exchange Commission.
Effective Time with respect to the Initial Registration Statement or, if filed prior to the execution and delivery of this Agreement, the Additional Registration Statement, means the date and time as of which such Registration Statement was declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c). If an Additional Registration Statement has not been filed prior to the execution and delivery of this Agreement but the Company has advised the Representatives that it proposes to file one, Effective Time with respect to such Additional Registration Statement means the date and time as of which such Registration Statement is filed and becomes effective pursuant to Rule 462(b).
Exchange Act means the Securities Exchange Act of 1934, as amended.
Final Prospectus means the Statutory Prospectus that discloses the public offering price, other 430A Information and other final terms of the Offered Securities and otherwise satisfies Section 10(a) of the Act.
General Use Issuer Free Writing Prospectus means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors, as evidenced by its being so specified in Schedule B to this Agreement.
Issuer Free Writing Prospectus means any issuer free writing prospectus, as defined in Rule 433, relating to the Offered Securities in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Companys records pursuant to Rule 433(g).
Limited Use Issuer Free Writing Prospectus means any Issuer Free Writing Prospectus that is not a General Use Issuer Free Writing Prospectus.
The Initial Registration Statement and the Additional Registration Statement are referred to collectively as the Registration Statements and each individually as a Registration Statement. A Registration Statement with reference to a particular time means the Initial Registration Statement and any Additional Registration Statement as of such time. A Registration Statement without reference to a time means such Registration Statement as of its Effective Time. For purposes of the foregoing definitions, 430A Information with respect to a Registration Statement shall be considered to be included in such Registration Statement as of the time specified in Rule 430A.
Rules and Regulations means the rules and regulations of the Commission.
Statutory Prospectus with reference to a particular time means the prospectus included in a Registration Statement immediately prior to that time, including any 430A Information or 430C Information with respect to such Registration Statement. For purposes of the foregoing definition, 430A Information shall be considered to be included in the Statutory Prospectus as of the actual time that form of prospectus is filed with the Commission pursuant to Rule 424(b) or Rule 462(c) and not retroactively.
Unless otherwise specified, a reference to a rule is to the indicated rule under the Act.
(b) Compliance with the Requirements of the Act. (i) (A) At their respective Effective Times and (B) on each Closing Date, each of the Initial Registration Statement and the Additional Registration Statement (if any) conformed and will conform in all material respects to the requirements of the Act and the Rules and Regulations, (ii) at their respective Effective Times, each of the Registration Statements did not and, as amended or supplemented, as applicable, will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) on its date, at the time of filing of the Final Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Time of the Additional Registration Statement in which the Final Prospectus is
included, and on each Closing Date, the Final Prospectus will conform in all respects to the requirements of the Act and the Rules and Regulations and will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (iv) on the date of this Agreement, at their respective Effective Times or issue dates and on each Closing Date, each Registration Statement, the Final Prospectus, any Statutory Prospectus, any prospectus wrapper and any Issuer Free Writing Prospectus complied or comply, and such documents and any further amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Final Prospectus, any Statutory Prospectus, any prospectus wrapper or any Issuer Free Writing Prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program. The preceding sentence does not apply to statements in or omissions from any such document based upon written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 8(b) hereof.
(c) Ineligible Issuer Status. (i) At the time of the initial filing of the Initial Registration Statement and (ii) at the date of this Agreement, the Company was not and is not an ineligible issuer, as defined in Rule 405, including (x) the Company or any other subsidiary in the preceding three years not having been convicted of a felony or misdemeanor or having been made the subject of a judicial or administrative decree or order as described in Rule 405 and (y) the Company in the preceding three years not having been the subject of a bankruptcy petition or insolvency or similar proceeding, not having had a registration statement be the subject of a proceeding under Section 8 of the Act and not being the subject of a proceeding under Section 8A of the Act in connection with the offering of the Offered Securities, all as described in Rule 405.
(d) General Disclosure Package. As of the Applicable Time, neither (i) the General Use Issuer Free Writing Prospectus(es) issued at or prior to the Applicable Time, the preliminary prospectus, dated September 29, 2016 (the Preliminary Prospectus) (which is the most recent Statutory Prospectus distributed to investors generally) and the other information, if any, stated in Schedule B to this Agreement to be included in the General Disclosure Package, all considered together (collectively, the General Disclosure Package), nor (ii) any individual Limited Use Issuer Free Writing Prospectus, when considered together with the General Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from any Statutory Prospectus or any Issuer Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 8(b) hereof.
(e) Issuer Free Writing Prospectuses. Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Offered Securities or until any earlier date that the Company notified or notifies the Representatives as described in the next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information then contained in the Registration Statement. If at any time following issuance of an Issuer Free Writing Prospectus, at a time when a prospectus relating to the Offered Securities is (or but for the exemption of Rule 172 would be) required to be delivered under the Act by any Underwriter or dealer, there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information then contained in the Registration Statement or as a result of which such Issuer Free Writing Prospectus, if republished immediately following such event or development, would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Company will promptly notify the
Representatives and will promptly amend or supplement such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
(f) Good Standing of the Company. The Company has been duly incorporated or formed, as applicable, is validly existing and in good standing as a corporation or limited liability company, as applicable, under the laws of the State of Delaware and is duly qualified to do business and in good standing as a foreign corporation or limited liability company, as applicable, in good standing in all other jurisdictions listed on Schedule D hereto in which its ownership or lease of property or the conduct of its businesses requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), results of operations, properties, business or prospects of the Company taken as a whole (a Material Adverse Effect). The Company has all power and authority necessary to own or hold its properties and to conduct the businesses in which it is engaged. After giving effect to the Reorganization Transactions, the Company will not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed on Schedule C hereto (Subsidiaries).
(g) Subsidiaries. Each of the Subsidiaries has been duly incorporated or formed, as applicable, and is existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as applicable, with power and authority (corporate or other) to own its properties and conduct its business as described in the General Disclosure Package; and each Subsidiary is duly qualified to do business as a foreign corporation or other entity in good standing in all other jurisdictions listed on Schedule D hereto in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be duly qualified or in good standing would not, individually or in the aggregate, have a Material Adverse Effect; all of the issued and outstanding capital stock or limited liability company interest, as applicable, of each Subsidiary has been duly authorized and validly issued and, in the case of any such corporation, is fully paid and nonassessable; and the capital stock or limited liability company interests, as applicable, of each Subsidiary owned by the Company, directly or indirectly, is owned free from liens, encumbrances and defects, other than those arising under the Credit Agreement, dated as of September 24, 2014, by and among Extraction Oil & Gas Holdings, LLC, as borrower, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto, as heretofore amended, restated, modified or supplemented, or as otherwise would not individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(h) Authorization of Agreement. The Company has all requisite corporate power to execute, deliver and perform its respective obligations under this Agreement. This Agreement has been duly authorized and validly executed and delivered by the Company.
(i) Offered Securities. The Offered Securities and all other outstanding shares of capital stock of the Company, after giving effect to the Reorganization Transactions, will have been duly authorized; after giving effect to the Reorganization Transactions, the authorized equity capitalization of the Company will be as set forth in the General Disclosure Package; after giving effect to the Reorganization Transactions, all outstanding shares of capital stock of the Company will be, and, when the Offered Securities have been delivered and paid for in accordance with this Agreement on each Closing Date, such Offered Securities will have been, validly issued, fully paid and nonassessable, will conform to the information in the General Disclosure Package and to the description of such Offered Securities contained in the Final Prospectus in all material respects; except as disclosed in the General Pricing Disclosure and the Final Prospectus, the stockholders of the Company have no preemptive rights with respect to the Offered Securities; and none of the outstanding shares of capital stock of the Company have been issued in violation of any preemptive or similar rights of any security holder.
(j) Absence of Defaults and Conflicts Resulting from Transaction. The issue and sale of the Offered Securities, the execution, delivery and performance by the Company of this Agreement, the application of the proceeds from the sale of the Offered Securities as described under Use of
Proceeds in each of the General Disclosure Package and the Final Prospectus and the consummation of the transactions contemplated hereby and thereby, will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, impose any lien, charge or encumbrance upon any property or assets of the Company or its Subsidiaries, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, license, lease or other agreement or instrument to which the Company or its Subsidiaries is a party or by which the Company or its Subsidiaries is bound or to which any of the property or assets of the Company or its Subsidiaries is subject, (ii) result in any violation of the provisions of the charter or by-laws (or similar organizational documents) of the Company or its Subsidiaries, or (iii) result in any violation of any statute or any judgment, order, decree, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or its Subsidiaries or their properties or assets, except, with respect to clauses (i) and (iii), conflicts, breaches, defaults or violations that would not reasonably be expected to have a Material Adverse Effect.
(k) Absence of Further Requirements. No consent, approval, authorization or order of, or filing, registration or qualification with any court or governmental agency or body having jurisdiction over the Company or any of its properties or assets is required for the issue and sale of the Offered Securities, the execution, delivery and performance by the Company of this Agreement, the application of the proceeds from the sale of the Offered Securities as described under Use of Proceeds in each of the General Disclosure Package and the Final Prospectus and the consummation of the transactions contemplated hereby and thereby, except for (i) such as have been, or prior to the Closing Date, will be, obtained or made, (ii) such consents, approvals, authorizations, orders, filings, registrations or qualifications as may be required under state securities or Blue Sky laws or by FINRA in connection with the purchase and distribution of the Offered Securities by the Underwriters, each of which has been obtained and is in full force and effect and (iii) for such consents that, if not obtained, have not or would not, in the aggregate reasonably be expected to have a Material Adverse Effect.
(l) Historical Financial Statements. The historical financial statements (including the related notes and supporting schedules) included in the General Disclosure Package and the Final Prospectus present fairly in all material respects the financial condition, results of operations and cash flows of the entities purported to be shown thereby, at the dates and for the periods indicated, and, except as disclosed in the General Disclosure Package and the Final Prospectus, have been prepared in conformity with accounting principles generally accepted in the United States applied on a consistent basis throughout the periods involved.
(m) Pro Forma Financial Statements. The unaudited pro forma financial statements and the related notes thereto included under the heading Pro Forma Financial Statements in the General Disclosure Package and the Final Prospectus present fairly in all material respects the information contained therein and have been properly presented on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustment used therein are appropriate to give effect to the transactions and circumstances referred to therein. The pro forma adjustments comply as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X under the Act and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements.
The unaudited pro forma financial statements included in the General Disclosure Package and the Final Prospectus include assumptions that provide a reasonable basis for presenting the significant effects directly attributable to the transactions and events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma adjustments reflect the proper application of those adjustments to the historical financial statement amounts in the unaudited pro forma financial statements included in the General Disclosure Package and the Final Prospectus. The unaudited pro forma financial statements included in the General Disclosure Package and the Final Prospectus comply as to form in all material respects with the applicable requirements of Regulation S-X under the Act. The other financial information and data included in the Final Prospectus under the caption Prospectus SummarySummary Historical and Pro Forma
Financial and Operating Data has been derived from the accounting records of the Company and presents fairly in all material respects the information shown thereby.
(n) Auditors. Each of PricewaterhouseCoopers LLP (PwC), Hein & Associates LLP (Hein) and KPMG LLP (KPMG), who has certified certain financial statements of the Company or assets acquired by the Company, whose report appears in the General Disclosure Package and the Final Prospectus and who has delivered the initial letter referred to in Section 7(a) hereof, is an independent public accounting firm within the meaning of the Act and the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board (the PCAOB).
(o) Internal Controls and Compliance with the Sarbanes-Oxley Act. There is and has been no failure on the part of the Company and any of the Companys directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated in connection therewith applicable to the Company. The Company maintains a system of internal controls, including, but not limited to, disclosure controls and procedures, internal controls over accounting matters and financial reporting, an internal audit function and legal and regulatory compliance controls that are sufficient to provide reasonable assurances that (i) transactions are executed in accordance with managements general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with managements general or specific authorization, and (iv) the recorded accounting for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the General Disclosure Package and Final Prospectus, since the date of the most recent balance sheet of the Company and its Subsidiaries reviewed or audited by PwC, (i) the Company has not been advised of or become aware of (A) any material weakness in the design or operation of internal controls that could adversely affect the ability of the Company or its Subsidiaries to record, process, summarize and report financial data, or any material weaknesses in internal controls, and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the internal controls of the Company and each of its Subsidiaries; and (ii) there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.
(p) No Material Adverse Change in Business. Except as described in the General Disclosure Package and the Final Prospectus, since the end of the period covered by the latest audited financial statements included the General Disclosure Package and the Final Prospectus, (i) neither the Company nor its Subsidiaries has (A) sustained any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or court or governmental action, order or decree, (B) issued or granted any securities, (C) incurred any material liability or obligation, direct or contingent, other than liabilities and obligations that were incurred in the ordinary course of business, (D) entered into any material transaction not in the ordinary course of business, or (E) declared or paid any dividend or distribution on its capital stock or limited liability company interests, as applicable, and (ii) there has not been any change in the capital stock or limited liability company interests, as applicable, or long-term debt of the Company or its Subsidiaries or any adverse change, or any development involving a prospective adverse change, in or affecting the condition (financial or otherwise), results of operations, stockholders equity, properties, management, business or prospects of the Company or its Subsidiaries, taken as a whole, in each case as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
(q) Title to Property. After giving effect to the Reorganization Transactions, the Company and its Subsidiaries will have good and marketable title to, or will have valid rights to lease or otherwise use, all items of real property and good and marketable title to, or will have valid rights to lease or otherwise use, all items of personal property that are material to the conduct of the respective
businesses of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects, except any liens, encumbrances and defects (i) as are described in the General Disclosure Package and the Final Prospectus, (ii) that do not materially interfere with the use made and proposed to be made of such property by such entity, (iii) incurred or granted under operating agreements, unitization and pooling agreements, production sales contracts, farmout agreements and other oil and gas exploration, participation and production agreements, in each case that secure payment of amounts not yet due and payable for the performance of other unmatured obligations and are of a scope and nature customary in the oil and gas industry or arise in connection with drilling and production operations or (iv) as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
(r) Rights-of-Way. After giving effect to the Reorganization Transactions and except as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and its Subsidiaries will have such consents, easements, rights-of-way or licenses from any person as are necessary to enable the Company to conduct its business in the manner described in the General Disclosure Package and the Final Prospectus, subject to qualifications as may be set forth in the General Disclosure Package and the Final Prospectus.
(s) Possession of Licenses and Permits. After giving effect to the Reorganization Transactions, the Company and its Subsidiaries will have such permits, licenses, patents, franchises, certificates of need and other approvals or authorizations of governmental or regulatory authorities (Permits) as are necessary under applicable law to own their properties and conduct their businesses in the manner described in the General Disclosure Package and the Final Prospectus, except for any of the foregoing that would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. After giving effect to the Reorganization Transactions, the Company and its Subsidiaries will have fulfilled and performed all of their obligations with respect to the Permits, and no event will have occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other impairment of the rights of the holder or any such Permits, except for any of the foregoing that would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor its Subsidiaries have received notice of any revocation or modification of any such Permits or has any reason to believe that any such Permits will not be renewed in the ordinary course.
(t) Possession of Intellectual Property. After giving effect to the Reorganization Transactions, the Company and its Subsidiaries will own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, know-how, software, systems and technology (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses and will have no reason to believe that the conduct of their respective businesses will conflict with, and will have not received any notice of any claim of conflict with, any such rights of others, except as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
(u) Litigation. Except as described in the General Disclosure Package and the Final Prospectus, there are no legal or governmental proceedings pending to which the Company or its Subsidiaries is a party or of which any property or assets of the Company or its Subsidiaries is the subject that would, in the aggregate, reasonably be expected to have a Material Adverse Effect or would, in the aggregate, reasonably be expected to have a material adverse effect on the performance by the Company of the performance of its obligations under this Agreement or the consummation of any of the transactions contemplated hereby. To the Companys knowledge, no such proceedings are threatened or contemplated by governmental authorities or others.
(v) Absence of Existing Defaults and Conflicts. Neither the Company nor its Subsidiaries is (i) in violation of its charter or by-laws (or similar organizational documents), (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant, condition or other obligation contained in any
indenture, mortgage, deed of trust, loan agreement, license or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject, or (iii) in violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over it or its property or assets, except in the case of clauses (ii) and (iii), to the extent any such conflict, breach, violation or default would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(w) Environmental Laws. Except as disclosed in the General Disclosure Package and the Final Prospectus, the Company and its Subsidiaries (i) are in compliance with all applicable federal, state and local laws, regulations, ordinances, rules, orders, judgments, decrees, permits and other legally enforceable requirements relating to pollution, the protection of human health or safety (to the extent such health or safety relate to exposure to hazardous or toxic substances or wastes, pollutants or contaminants), the environment, or natural resources, or to use, handling, storage, manufacture, transportation, treatment, discharge, disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants (Environmental Laws), (ii) have timely applied for or received and are in compliance with all such received permits, authorizations and approvals required of them by Environmental Laws to conduct their respective businesses as currently conducted, and (iii) have not received written notice, or, with respect to the Company, otherwise have knowledge of, any actual or alleged (y) violation of Environmental Laws or (z) of liability under Environmental Laws for the disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except for any such failure to comply, or such failure to receive such required permits, authorizations or approvals, or such receipt of notice or such knowledge of such violation or liability, as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as described in the General Disclosure Package and the Final Prospectus, there are no proceedings that are pending, or known to be contemplated, against the Company or its Subsidiaries under Environmental Laws in which a governmental authority is also a party, other than such proceedings regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed.
(x) Tax Returns. The Company and its Subsidiaries have filed all federal, state, local and foreign tax returns required to be filed through the date hereof, subject to permitted extensions, and have paid all taxes due, except as would not, in the aggregate, reasonably be expected to have a Material Adverse Effective, there is no tax deficiency that has been determined adversely to the Company or its Subsidiaries, nor does the Company have any knowledge of any tax deficiencies that have been, or would reasonably be expected to be asserted against the Company or its Subsidiaries that would, in the aggregate, reasonably be expected to have a Material Adverse Effect.
(y) Investment Company Act. The Company is not, and after giving effect to the offer and sale of the Offered Securities and the application of the proceeds therefrom as described under Use of Proceeds in each of the General Disclosure Package and the Final Prospectus, will not be, an investment company as defined in the Investment Company Act of 1940, as amended (the Investment Company Act), and the rules and regulations of the Commission thereunder.
(z) Reserve Engineers. Ryder Scott Company, L.P. (Ryder Scott), whose reports appear in the General Disclosure Package and the Final Prospectus and who has delivered the letter referred to in Section 7(b) hereof, was, as of the date of such report, and is, as of the date hereof, an independent petroleum engineer with respect to the Company.
(aa) Absence of Manipulation. The Company and, to the Companys knowledge, its affiliates have not taken, directly or indirectly, any action designed to or that has constituted or that would reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company in connection with the offering of the Offered Securities.
(bb) No Unlawful Payments. None of the Company or its Subsidiaries, nor, to the knowledge of the Company, after due inquiry, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or its Subsidiaries, have in the course of their actions for, or
on behalf of the Company or its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official, foreign office (as defined in the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (collectively, the FCPA)) or employee from corporate funds; (iii) violated or is in violation of any provision of the FCPA, the Bribery Act 2010 of the United Kingdom, as amended, or any other applicable anti-corruption or anti-bribery laws or statutes; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any domestic government official, foreign official or employee; and the Company and its Subsidiaries and, to the knowledge of the Company, the affiliates of the Company have conducted their respective businesses in compliance with the FCPA, the Bribery Act 2010 of the United Kingdom, as amended, and any other applicable anti-corruption or anti-bribery laws or statutes.
(cc) Compliance with Anti-Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where the Company and any of its Subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the Money Laundering Laws) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(dd) Compliance with Sanction Laws. None of the Company or its Subsidiaries, nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or its Subsidiaries, are currently subject to or the target of any sanctions administered or enforced by the Office of Foreign Assets Control of the U.S. Treasury Department, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majestys Treasury, or other relevant sanctions authority (collectively, Sanctions); and (i) the Company and its Subsidiaries are not located, organized or resident in a country that is the subject of Sanctions (including, without limitation, Cuba, Iran, North Korea, Sudan, and Syria); and (ii) the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person, or in any country or territory, that currently is the subject or target of Sanctions or in any other manner that will result in a violation by any person (including any person participating in the transaction whether as an underwriter, advisor, investor or otherwise) of Sanctions. The Company and its Subsidiaries have not knowingly engaged in for the past three years, are not now knowingly engaged in, and will not knowingly engage in, any dealings or transactions with any individual or entity, or in any country or territory, that at the time of the dealing or transaction is or was the subject or target of Sanctions.
(ee) Accurate Disclosure. The statements made in the General Disclosure Package and the Final Prospectus, insofar as they purport to constitute summaries of the terms of the contracts and other documents that are so described, constitute accurate summaries of the terms of such contracts and documents in all material respects.
(ff) Certain Relationships and Related Party Transactions. No relationship, direct or indirect, that would be required to be described in a registration statement of the Company pursuant to Item 404 of Regulation S-K, exists between or among the Company or its Subsidiaries, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or its Subsidiaries, on the other hand, that has not been described in the General Disclosure Package and the Final Prospectus.
(gg) Absence of Labor Dispute. No labor disturbance by or dispute with the employees of the Company or its Subsidiaries exists or, to the knowledge of the Company, is imminent that would
reasonably be expected to have a Material Adverse Effect.
(hh) Accurate Disclosure. The statements made in the General Disclosure Package and the Final Prospectus under the captions BusinessRegulation of the Oil and Gas Industry, BusinessRegulation of Environmental and Occupational Safety and Health Matters and Material U.S. Federal Income Tax Considerations for Non-U.S. Holders, insofar as they purport to constitute summaries of the terms of statutes, rules or regulations, legal or governmental proceedings, constitute accurate summaries of the terms of such statutes, rules and regulations, legal and governmental proceedings in all material respects.
(ii) Insurance. Except as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and its Subsidiaries carry, or are covered by, insurance from insurers of recognized financial responsibility in such amounts and covering such risks as is reasonably adequate for the conduct of their respective businesses. All policies of insurance of the Company and its Subsidiaries are in all material respects in full force and effect; and the Company and its Subsidiaries are in compliance with the terms of such policies in all material respects; and neither the Company nor its Subsidiaries have received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance, except as would not reasonably be expected to have a Material Adverse Effect. There are no claims by the Company or its Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause, the denial or defense of which would reasonably be expected to have a Material Adverse Effect; and neither the Company nor its Subsidiaries have reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a Material Adverse Effect.
(jj) Compliance with ERISA. Except, in each case, for any such matter as would not reasonably be expected to have a Material Adverse Effect and as set forth in or contemplated by the General Disclosure Package and the Final Prospectus, (i) each employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (ERISA)) for which the Company or any member of its Controlled Group (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the Code) the Control Group) would have any liability (each a Plan) has been maintained in compliance with its terms and with the requirements of all applicable statutes, rules and regulations including ERISA and the Code; (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan, excluding transactions effected pursuant to a statutory or administrative exemption; (iii) with respect to each Plan subject to Title IV of ERISA, (A) no reportable event (within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur, excluding any reportable event for which a waiver could apply, (B) no Plan is or is reasonably expected to be at risk status (within the meaning of Section 430 of the Code or Section 303 of ERISA) (C) there has been no filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan or the receipt by the Company or any member of the Control Group from the Pension Benefit Guaranty Corporation or the plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, (D) no conditions contained in Section 303(k)(1)(A) of ERISA for imposition of a lien shall have been met with respect to any Plan and (E) neither the Company nor any member of its Controlled Group has incurred, or reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default) in respect of a Plan (including a multiemployer plan, within the meaning of Section 4001(c)(3) of ERISA) (a Multiemployer Plan); (iv) no Multiemployer Plan is, or is expected to be, insolvent (within the meaning of Section 4245 of ERISA), in reorganization (within the meaning of Section 4241 of ERISA), or in endangered or critical status (within the meaning of Section 432 of the Code or Section 304 of ERISA); and (v) each Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.
(kk) No Restriction on Dividends. No Subsidiary is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on its capital stock or limited liability company interests, as applicable, from repaying to the Company any loans or advances to it from the Company or from transferring any of its property or assets to the Company or any other Subsidiary, except as described in the General Disclosure Package and the Final Prospectus.
(ll) Statistical and Market-Related Data. The statistical and market-related data included in the General Disclosure Package and the Final Prospectus is based on or derived from sources that the Company believes to be reliable in all material respects.
(mm) Registration Rights. Except as disclosed in the General Disclosure Package and the Final Prospectus and as set forth in the Form of Existing Owners Registration Rights Agreement and the Form of Series A Preferred Registration Rights Agreement, filed with the Commission on September 26, 2016, as Exhibits 4.1 and 4.2, respectively, to the Registration Statement, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act (collectively, registration rights), and any person to whom the Company has granted registration rights has agreed not to exercise such rights until after the expiration of the Lock-Up Period referred to in Section 5(l) hereof.
(nn) No Finders Fee. The Company is not party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against the Company or the Underwriters for a brokerage commission, finders fee or like payment in connection with the offering and sale of the Offered Securities.
(oo) Listing. The Offered Securities have been approved for listing on the NASDAQ Stock Capital Market LLC (NASDAQ), subject to official notice of issuance.
(pp) Accurate Disclosure. The statements set forth in each of the General Disclosure Package and the Final Prospectus under the caption Description of Capital Stock, insofar as they purport to constitute a summary of the terms of the Offered Securities and under the captions Certain Relationships and Related Party Transactions and Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesDebt Arrangements, insofar as they purport to summarize documents referred to therein, are accurate summaries in all material respects.
(qq) Absence of Unlawful Influence. The Company has not offered or sold, or caused the Underwriters to offer or sell, any Offered Securities to any person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i) a customer or supplier of the Company to alter the customers or suppliers level or type of business with the Company or (ii) a trade journalist or publication to write or publish favorable information about the Company or its products.
(rr) Emerging Growth Company. The Company is an emerging growth company as defined in Section 2(a)(19) of the Act.
(ss) Testing-the-Waters Communication. The Company has not (i) alone engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representatives with entities that are qualified institutional buyers within the meaning
of Rule 144A or institutions that are accredited investors within the meaning of Rule 501 and (ii) authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. Testing-the-Waters Communication means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Act. Further, the Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule IV hereto. Written Testing-the-Waters Communication means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements and subject to the terms and conditions set forth herein, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of $17.955 per share, that number of Firm Securities (rounded up or down, as determined by the Representatives in their discretion, in order to avoid fractions) obtained by multiplying the number of Firm Securities by a fraction the numerator of which is the number of Firm Securities set forth opposite the name of such Underwriter in Schedule A hereto and the denominator of which is the total number of Firm Securities.
The Company will deliver the Firm Securities to or as instructed by the Representatives for the accounts of the several Underwriters in a form reasonably acceptable to the Representatives against payment of the purchase price in Federal (same day) funds by official bank check or checks or wire transfer to an account at a bank acceptable to the Representatives drawn to the order of the Company, at the office of Latham & Watkins LLP, 811 Main Street, Suite 3700, Houston, Texas 77002, at 10:00 A.M. (Eastern Time), on October 17, 2016, or at such other time not later than seven full business days thereafter as the Representatives and the Company determine, such time being herein referred to as the First Closing Date. For purposes of Rule 15c6-1 under the Exchange Act, the First Closing Date (if later than the otherwise applicable settlement date) shall be the settlement date for payment of funds and delivery of securities for all the Offered Securities sold pursuant to the offering. Delivery of the Firm Securities will be made through the facilities of the Depositary Trust Company (the DTC) unless the Representatives shall otherwise instruct.
In addition, upon written notice from the Representatives given to the Company from time to time not more than 30 days subsequent to the date of the Final Prospectus, the Underwriters may purchase all or less than all of the Optional Securities at the purchase price per Security to be paid for the Firm Securities. Such notice shall set forth (i) the aggregate number of shares of Optional Securities to be sold by the Company as to which the Underwriters are exercising the option and (ii) the time, date and place at which the Optional Securities will be delivered (each time for the delivery of and payment for the Optional Securities being herein referred to as an Optional Closing Date, which may be the First Closing Date) (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a Closing Date). The Company agrees to sell to the Underwriters the number of Optional Securities specified in such notice and the Underwriters agree, severally and not jointly, to purchase such Optional Securities. Such Optional Securities shall be purchased for the account of each Underwriter in the same proportion as the number of Firm Securities set forth opposite such Underwriters name bears to the total number of Firm Securities (subject to adjustment by the Representatives to eliminate fractions) and may be purchased by the Underwriters only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised from time to time and to the extent not previously exercised may be surrendered and terminated at any time upon notice by the Representatives to the Company.
Each Optional Closing Date shall be determined by the Representatives but shall be not later than five full business days after written notice of election to purchase Optional Securities is given. The Company will deliver the Optional Securities being purchased on each Optional Closing Date to or as instructed by the Representatives for the accounts of the several Underwriters in a form reasonably acceptable to the Representatives, against payment of the purchase price therefor in Federal (same day) funds by official bank check or checks or wire transfer to an account at a bank acceptable to the Representatives drawn to the order of the Company, at the above office of Latham & Watkins LLP. The delivery of any Optional Securities will
be made through the facilities of the DTC unless the Representatives shall otherwise instruct.
4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Offered Securities for sale to the public as set forth in the Final Prospectus.
5. Certain Agreements of the Company. The Company agrees with the several Underwriters that:
(a) Additional Filings. The Company will file the Final Prospectus, in a form approved by the Representatives, with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by the Representatives, subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the second business day following the execution and delivery of this Agreement or (B) the fifteenth business day after the Effective Time of the Initial Registration Statement. The Company will advise the Representatives promptly of any such filing pursuant to Rule 424(b) and provide satisfactory evidence to the Representatives of such timely filing. If an Additional Registration Statement is necessary to register a portion of the Offered Securities under the Act but the Effective Time thereof has not occurred as of the execution and delivery of this Agreement, the Company will file the additional registration statement or, if filed, will file a post-effective amendment thereto with the Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on the date of this Agreement or, if earlier, on or prior to the time the Final Prospectus is finalized and distributed to any Underwriter, or will make such filing at such later date as shall have been consented to by the Representatives.
(b) Filing of Amendments: Response to Commission Requests. The Company will promptly advise the Representatives of any proposal to amend or supplement at any time the Initial Registration Statement, any Additional Registration Statement or any Statutory Prospectus and will not effect such amendment or supplementation without the Representatives consent; and the Company will also advise the Representatives promptly of (i) the effectiveness of any Additional Registration Statement (if its Effective Time is subsequent to the execution and delivery of this Agreement), (ii) any amendment or supplementation of a Registration Statement or any Statutory Prospectus, (iii) any request by the Commission or its staff for any amendment to any Registration Statement, for any supplement to any Statutory Prospectus or for any additional information, (iv) the institution by the Commission of any stop order proceedings in respect of a Registration Statement or the threatening of any proceeding for that purpose, and (v) the receipt by the Company of any notification with respect to the suspension of the qualification of the Offered Securities in any jurisdiction or the institution or threatening of any proceedings for such purpose. The Company will use its reasonable best efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal thereof.
(c) Continued Compliance with Securities Laws. If, at any time when a prospectus relating to the Offered Securities is (or but for the exemption in Rule 172 would be) required to be delivered under the Act by any Underwriter or dealer, any event occurs as a result of which the Final Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Registration Statement or supplement the Final Prospectus to comply with the Act, the Company will promptly notify the Representatives of such event and will promptly prepare and file with the Commission and furnish, at its own expense, to the Underwriters and the dealers and any other dealers upon request of the Representatives, an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance. Neither the Representatives consent to, nor the Underwriters delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 7 hereof.
(d) Rule 158. As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to its security holders an earnings statement covering a period of at least 12 months beginning after the Effective Date of the Initial Registration Statement (or, if later, the Effective Time of the Additional Registration Statement), which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. For the purpose of the preceding sentence, Availability Date means the day after the end of the fourth fiscal quarter following the fiscal quarter that includes such Effective Time on which the Company is required to file its Form 10-Q for such fiscal quarter except that, if such fourth fiscal quarter is the last quarter of the Companys fiscal year, Availability Date means the day after the end of such fourth fiscal quarter on which the Company is required to file its Form 10-K.
(e) Furnishing of Prospectuses. The Company will furnish, upon request, to the Representatives copies of each Registration Statement (three of which will be signed and will include all exhibits), each related Statutory Prospectus, and, so long as a prospectus relating to the Offered Securities is (or but for the exemption in Rule 172 would be) required to be delivered under the Act, the Final Prospectus and all amendments and supplements to such documents, in each case in such quantities as the Representatives request. The Final Prospectus shall be so furnished within two business days following the execution and delivery of this agreement, unless otherwise agreed by the Company and the Representatives. All other such documents shall be so furnished as soon as available, unless otherwise agreed by the Company and the Representatives.
(f) Blue Sky Qualifications. The Company shall cooperate with the Underwriters and counsel for the Underwriters to qualify or register the Offered Securities for resale under (or obtain exemptions from the application of) the state securities or Blue Sky laws of those jurisdictions designated by the Underwriters, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Offered Securities. Notwithstanding the foregoing, the Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process or taxation in any such jurisdiction where it is not presently qualified or subject to taxation.
(g) Reporting Requirements. During the period of five years hereafter, the Company will furnish to the Representatives and, upon request, to each of the other Underwriters, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to the Representatives (i) as soon as available, upon request, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to stockholders, and (ii) from time to time, such other information concerning the Company as the Representatives may reasonably request. However, so long as the Company is subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act and is timely filing reports with the Commission on its Electronic Data Gathering, Analysis and Retrieval system (EDGAR), it is not required to furnish such reports or statements to the Underwriters.
(h) Payment of Expenses. The Company agrees with the several Underwriters that the Company will pay all expenses incident to the performance of the obligations of the Company under this Agreement, including but not limited to, (i) any filing fees and reasonable attorneys fees and expenses incurred by the Company or the Underwriters in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Offered Securities for offer and sale under the state securities or Blue Sky laws of such jurisdictions as the Representatives designate and the preparation and printing of memoranda relating thereto, (ii) the filing fees incident to, and the reasonable fees and expenses of counsel for the Underwriters up to $20,000, in connection with the FINRAs review and approval of the Underwriters participation in the offering and distribution of the Offered Securities, (iii) fees and expenses incident to listing the Offered Securities on the NASDAQ, (iv) fees and expenses in connection with the registration of the Offered Securities under the Exchange Act, (v) all reasonable and documented fees and disbursements of counsel (including non-U.S. counsel) incurred by the Underwriters in connection with the Directed Share Program and stamp duties, similar taxes or duties or other taxes, if any, incurred by the underwriters in connection with the Directed Share Program, (vi) expenses incurred in distributing preliminary prospectuses, the Final Prospectus (including any amendments and supplements thereto) and the Registration Statement (and exhibits thereto) to the Underwriters and expenses incurred for preparing, printing and distributing any Issuer Free Writing Prospectuses to
investors or prospective investors, (vii) the reasonable, out-of-pocket fees and expenses of the QIU acting in its capacity as such and (viii) all other fees, costs and expenses referred to in Item 13 of Part II of the Registration Statement. The Company will also pay or reimburse the Underwriters (to the extent incurred by them) for costs and expenses of the Underwriters and the Companys officers and employees and any other expenses of the Underwriters and the Company relating to investor presentations or any road show in connection with the offering and sale of the Offered Securities including, without limitation, any travel expenses of the Companys officers and employees and any other expenses of the Company, including 50% of the cost of the chartering of airplanes. It is understood, however, that except as provided in this Section 5(h) and Sections 8 and 10 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel and any road show expenses incurred by them (other than costs and expenses incurred by the Underwriters on behalf of the Company).
(i) Use of Proceeds. The Company will use the net proceeds received by it in connection with this offering in the manner described in the Use of Proceeds section of the General Disclosure Package and the Final Prospectus.
(j) Absence of Manipulation. The Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, stabilization or manipulation of the price of any securities of the Company to facilitate the sale or resale of the Offered Securities.
(l) (A) Restriction on Sale of Securities by the Company. For the period specified below (the Lock-Up Period), the Company will not, directly or indirectly, take any of the following actions with respect to its Securities or any securities convertible into or exchangeable or exercisable for any of its Securities (Lock-Up Securities): (i) offer, sell, issue, contract to sell, pledge or otherwise dispose of Lock-Up Securities (other than the Offered Securities and shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof and described in the Preliminary Prospectus or the General Disclosure Package), (ii) offer, sell, issue, contract to sell, contract to purchase or grant any option, right or warrant to purchase Lock-Up Securities (other than the grant of options pursuant to employee benefit plans, option plans, qualified stock option plans or other employee compensation plans existing on the date hereof and described in the Preliminary Prospectus or the General Disclosure Package), (iii) enter into any swap, hedge or any other agreement that transfers, in whole or in part, the economic consequences of ownership of Lock-Up Securities, (iv) establish or increase a put equivalent position or liquidate or decrease a call equivalent position in Lock-Up Securities within the meaning of Section 16 of the Exchange Act or (v) file with the Commission a registration statement under the Act relating to Lock-Up Securities, or publicly disclose the intention to take any such action, without the prior written consent of the Representatives, except (i) issuances of Lock-Up Securities pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options, in each case outstanding on the date hereof, (ii) the filing of a registration statement on Form S-8 relating to, and the issuance and sale of Lock-Up Securities pursuant to, the terms of a plan described in the General Disclosure Package and the Final Prospectus and (iii) the filing of a registration statement to register to sale of Securities issuable upon the conversion of shares of Series A Preferred Stock. The initial Lock-Up Period will commence on the date hereof and continue for 180 days after the date hereof or such earlier date that the Representatives consent to in writing.
(B) Agreement to announce lock-up waiver. If the Representatives, in their sole discretion, agree to release or waive the restrictions set forth in a lock-up letter described in Section 7(l) hereof for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit A hereto through a major news service at least two business days before the effective date of the release or waiver
(m) Transfer Restrictions. In connection with the Directed Share Program, the Company will ensure that the Directed Shares will be restricted to the extent required by the FINRA or the FINRA rules from sale, transfer, assignment, pledge or hypothecation for a period of three months following the date of the effectiveness of the Registration Statement. Wells Fargo will notify the Company as to which Participants will need to be so restricted. The Company will direct the transfer agent to place stop transfer restrictions upon such securities for such period of time.
6. Free Writing Prospectuses. The Company represents and agrees that, unless it obtains the prior consent of the Representatives, and each Underwriter represents and agrees that, unless it obtains the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the Offered Securities that would constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a free writing prospectus, as defined in Rule 405, required to be filed with the Commission. Any such free writing prospectus consented to by the Company and the Representatives is hereinafter referred to as a Permitted Free Writing Prospectus. The Company and the Representatives agree that any such Permitted Free Writing Prospectus is listed on Schedule B hereto. The Company represents that it has treated and agrees that it will treat each Permitted Free Writing Prospectus as an issuer free writing prospectus, as defined in Rule 433, and has complied and will comply with the requirements of Rules 164 and 433 applicable to any Permitted Free Writing Prospectus, including timely Commission filing where required, legending and record keeping. The Company represents that it has satisfied and agrees that it will satisfy the conditions in Rule 433 to avoid a requirement to file with the Commission any electronic road show. If at any time following issuance of an Issuer Free Writing Prospectus, at a time when a prospectus relating to the Offered Securities is (or but for the exemption of Rule 172 would be) required to be delivered under the Act by any Underwriter or dealer, there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information then contained in the Registration Statement or as a result of which such Issuer Free Writing Prospectus, if republished immediately following such event or development, would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
7. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Securities on the First Closing Date and the Optional Securities to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties of the Company herein (as though made on such Closing Date), to the accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent:
(a) Auditor Comfort Letters. The Representatives shall have received a comfort letter, dated the date hereof, of each of PwC, Hein and KPMG in form and substance satisfactory to the Representatives, covering the financial information in the Registration Statements, the General Disclosure Package and the Final Prospectus and other customary matters. In addition, on each Closing Date, the Underwriters shall have received from each such accountant a bring-down comfort letter dated such Closing Date addressed to the Underwriters, in form and substance satisfactory to the Representatives, in the form of the comfort letter delivered on the date hereof, except that (i) it shall state the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants comfort letters to underwriters in connection with registered public offerings and (ii) procedures shall be brought down to a date no more than three (3) days prior to such Closing Date, except as otherwise agreed by the Representatives.
(b) Ryder Scott Comfort Letter. The Representatives shall have received a letter, dated the date hereof, of Ryder Scott, independent petroleum engineers, in form and substance satisfactory to the Representatives, covering the oil and gas reserves information in the Registration Statement, the General Disclosure Package and the Final Prospectus and other customary matters. In addition, on each Closing Date, the Underwriters shall have received from
such independent petroleum engineers a bring-down comfort letter dated such Closing Date addressed to the Underwriters, in form and substance satisfactory to the Representatives, in the form of the comfort letter delivered on the date hereof, except that (i) it shall cover the oil and gas reserves information in the Registration Statement and the Final Prospectus and any amendment or supplement thereto and (ii) procedures shall be brought down to a date no more than three (3) days prior to the Closing Date, except as otherwise agreed by the Representatives.
(c) Effectiveness of Registration Statement. If the Effective Time of the Additional Registration Statement (if any) is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or, if earlier, the time the Final Prospectus is finalized and distributed to any Underwriter, or shall have occurred at such later time as shall have been consented to by the Representatives. The Final Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) hereof. Prior to such Closing Date, no stop order suspending the effectiveness of a Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Company or the Representatives, shall be contemplated by the Commission.
(d) No Material Adverse Change. Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and its Subsidiaries taken as a whole, which, in the judgment of the Representatives, is material and adverse and makes it impractical or inadvisable to market the Offered Securities; (ii) any downgrading in the rating of any debt securities of the Company by any nationally recognized statistical rating organization (as defined in Section 3(a)(62) of the Exchange Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating) or any announcement that the Company has been placed on negative outlook; (iii) any change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls the effect of which is such as to make it, in the judgment of the Representatives, impractical to market or to enforce contracts for the sale of the Offered Securities, whether in the primary market or in respect of dealings in the secondary market; (iv) any suspension or material limitation of trading in securities generally on the NASDAQ, or any setting of minimum or maximum prices for trading on such exchange; (v) or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (vi) any banking moratorium declared by any U.S. federal or New York authorities; (vii) any major disruption of settlements of securities, payment or clearance services in the United States or any other country where such securities are listed or (viii) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States, any declaration of war by Congress or any other national or international calamity or emergency if, in the judgment of the Representatives, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency is such as to make it impractical or inadvisable to market the Offered Securities or to enforce contracts for the sale of the Offered Securities.
(e) Opinion of Counsel for the Company. The Representatives shall have received an opinion, dated such Closing Date, of Vinson & Elkins L.L.P., as to the matters described in Schedule E hereto.
(f) Opinion of Colorado Counsel for the Company. The Representatives shall have received an opinion, dated such Closing Date, of Colorado counsel to the Company and XOG Services Inc., a Colorado corporation, as to the matters described in Schedule F hereto.
(g) Opinion of Counsel for Underwriters. The Representatives shall have received from Latham & Watkins LLP, counsel for the Underwriters, such opinion or opinions, dated such Closing Date, with respect to such matters as the Representatives may require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass
upon such matters.
(h) Officers Certificate. The Representatives shall have received a certificate, dated such Closing Date, of an executive officer of the Company and a principal financial or accounting officer of the Company in which such officers shall state that: the representations and warranties of the Company in this Agreement are true and correct; the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date; no stop order suspending the effectiveness of any Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the best of their knowledge, are contemplated by the Commission; and they have examined the General Disclosure Package and the Final Prospectus, and, in their opinion, (A) (1) the General Disclosure Package, as of the Applicable Time, and (2) the Final Prospectus, as of its date, did not and do not contain any untrue statement of a material fact and did not and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the light of the circumstances under which they were made) not misleading, and (B) since the Effective Date, no event has occurred that should have been set forth in a supplement or amendment to the Final Prospectus or any Issuer Free Writing Prospectus that has not been so set forth.
(i) Lock-Up Agreements. On or prior to the date hereof, the Representatives shall have received lockup letters in the form of Exhibit B from each of the parties listed on Schedule G hereto.
The Company will furnish the Representatives with any additional opinions, certificates, letters and documents as the Representatives reasonably request and conformed copies of documents delivered pursuant to this Section 7. The Representatives may in their sole discretion waive on behalf of the Underwriters compliance with any conditions to the obligations of the Underwriters hereunder, whether in respect of an Optional Closing Date or otherwise.
8. Indemnification and Contribution. (a) Indemnification of Underwriters by Company. The Company will indemnify and hold harmless each Underwriter, its partners, members, directors, officers, employees, agents, affiliates and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act (each an Indemnified Party), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject, under the Act, the Exchange Act, other Federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any part of any Registration Statement at any time, any Statutory Prospectus as of any time, the Final Prospectus or any Issuer Free Writing Prospectus, or arise out of or are based upon the omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending against any loss, claim, damage, liability, action, investigation or proceeding whatsoever (whether or not such Indemnified Party is a party thereto), whether threatened or commenced, and in connection with the enforcement of this provision with respect to any of the above as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (b) below.
The Company agrees to indemnify and hold harmless Wells Fargo and its affiliates and each person, if any, who controls Wells Fargo within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act (the Designated Entities), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact contained in any material prepared by or with the consent of the Company for distribution to Participants in connection with the Directed Share Program or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) arising out of or based upon the failure of any Participant to pay for and accept delivery of Directed Shares that the Participant agreed to purchase; or (iii) arising out of, related to, or in connection with the Directed Share Program, other than losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the willful misconduct or gross negligence of the Designated Entities.
(b) Indemnification of Company. Each Underwriter will severally and not jointly indemnify and hold harmless the Company, each of its directors and each of its officers who signs a Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act (each, an Underwriter Indemnified Party), against any losses, claims, damages or liabilities to which such Underwriter Indemnified Party may become subject, under the Act, the Exchange Act, or other Federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement at any time, any Statutory Prospectus at any time, the Final Prospectus or any Issuer Free Writing Prospectus or arise out of or are based upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representatives specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by such Underwriter Indemnified Party in connection with investigating or defending against any such loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Underwriter Indemnified Party is a party thereto), whether threatened or commenced, based upon any such untrue statement or omission, or any such alleged untrue statement or omission as such expenses are incurred, it being understood and agreed that the only such information furnished by any Underwriter consists of the following information in the Final Prospectus furnished on behalf of each Underwriter: (i) the eighth paragraph on the cover of the Final Prospectus; (ii) the concession and reallowance figures appearing in the fifth paragraph under the caption Underwriting (Conflicts of Interest) and (iii) the paragraph relating to stabilization by the Underwriters under the caption Underwriting (Conflicts of Interest).
(c) Indemnification of the QIU. Without limitation and in addition to its obligation under the other subsections of this Section 8, the Company agrees to indemnify and hold harmless the QIU, its officers and employees and each person, if any, who controls the QIU within the meaning of Section 15 and Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities arising out of or based upon the QIUs acting as a qualified independent underwriter (within the meaning of Rule 5121(f)(12) of FINRA) in connection with the offering contemplated by this Agreement, and agrees to reimburse each such indemnified person for any legal or other expense reasonably incurred by them in connection with investigating or defending against any loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not the QIU is a party thereto), whether threatened or commenced, and in connection with the enforcement of this provision with respect to any of the above as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability results from the gross negligence or willful misconduct of the QIU.
(d) Actions against Parties; Notification. Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under subsection (a), (b) or (c) above, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a), (b) or (c) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a), (b) or (c) above. In case any such action is brought against any indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding anything contained herein to the contrary, if indemnity may be sought pursuant to the last paragraph in Section 8(a) hereof in respect of such action or proceeding, then in addition to such separate firm for the indemnified parties, the indemnifying party shall be liable for the reasonable fees and expenses of not more than one separate firm (in addition to any local counsel) for Wells Fargo for the defense of any losses, claims, damages and liabilities arising out of the Directed Share Program, and all persons, if any, who control Wells Fargo within the meaning of either Section 15 of the Act of Section 20 of the Exchange Act. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party.
(e) Contribution. If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a), (b) or (c) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (e). Notwithstanding the provisions of this subsection (e), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8(e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 8(e).
9. Default of Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Offered Securities hereunder on either the First Closing Date or any Optional Closing Date and the aggregate number of shares of Offered Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date, the Representatives may make arrangements satisfactory to the Company for the purchase of such Offered Securities by other persons, including any of the Underwriters, but if no such arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate number of shares of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date and arrangements satisfactory to the Representatives and the Company for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company, except as provided in Section 10 hereof (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement will not terminate as to the Firm Securities or any Optional Securities purchased prior to such termination). As used in this Agreement, the term Underwriter includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default.
10. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the QIU, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If the purchase of the Offered Securities by the Underwriters is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 9 hereof or the occurrence of any event specified in Section 7(d) hereof (other than the occurrence of an event described in Section 7(d)(v)) hereof, the Company will reimburse the Underwriters for all out-of-pocket expenses (including reasonable documented fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities, and the respective obligations of the Company and the Underwriters pursuant to Section 8 hereof shall remain in effect. In addition, if any Offered Securities have been purchased hereunder, the representations and warranties in Section 2 hereof and all obligations under Section 5 hereof shall also remain in effect.
11. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, hand delivered or telecopied and confirmed to the Representatives at Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, New York 10010-3629, Attention: LCD-IBD; Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019, Attention: Syndicate Registration (Fax: (646) 834-8133); and Goldman, Sachs & Co., 200 West Street, New York, NY 10282-2198, Attention: Registration Department or, if sent to the Company, will be mailed, hand delivered or telecopied and confirmed to it at 370 17th Street, Suite 5300, Denver, Colorado 80202, Attention: Russell T. Kelly, Jr. (Fax: (713) 871-0388), with copies to Vinson & Elkins L.L.P., 1001 Fannin, Suite 2500, Houston, Texas 77002, Attention: Douglas E. McWilliams (Fax: (713) 615-5725) and Vinson & Elkins L.L.P., 1001 Fannin, Suite 2500, Houston, Texas 77002, Attention: Julian S. Seiguer (Fax: (713) 615-5862).
12. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective personal representatives and successors and the officers and directors and controlling persons referred to in Section 7 hereof, and no other person will have any right or obligation hereunder.
13. Representation of Underwriters. The Representatives will act for the several Underwriters in connection with the transactions contemplated by this Agreement, and any action under this Agreement taken by the Representatives jointly or by Credit Suisse will be binding upon all the Underwriters.
14. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.
15. Absence of Fiduciary Relationship. The Company acknowledges and agrees that:
(a) No Other Relationship. The Representatives have been retained solely to act as underwriters in connection with the sale of the Offered Securities and that no fiduciary, advisory or agency
relationship between the Company, on the one hand, and the Representatives, on the other, has been created in respect of any of the transactions contemplated by this Agreement or the Final Prospectus, irrespective of whether the Representatives have advised or are advising the Company on other matters;
(b) Arms Length Negotiations. The price of the Offered Securities set forth in this Agreement was established by Company following discussions and arms-length negotiations with the Representatives, and the Company is capable of evaluating and understanding and understand and accepts the terms, risks and conditions of the transactions contemplated by this Agreement;
(c) Absence of Obligation to Disclose. The Company has been advised that the Representatives and its affiliates are engaged in a broad range of transactions, which may involve interests that differ from those of the Company and that the Representatives have no obligation to disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency relationship; and
(d) Waiver. The Company waives, to the fullest extent permitted by law, any claims they may have against the Representatives for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that the Representatives shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company, including stockholders, employees or creditors of the Company.
16. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Company irrevocably and unconditionally waives any objection to the laying of venue of any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in Federal and state courts in the Borough of Manhattan in the City of New York and irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such suit or proceeding in any such court has been brought in an inconvenient forum.
17. Patriot Act. In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Company, which information may include the name and address of their respective clients, as well as other information that will allow the Underwriters to properly identify their respective clients.
[Signature Pages Follows]
If the foregoing is in accordance with the Representatives understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement among the Company and the several Underwriters in accordance with its terms.
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Very truly yours, | |
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EXTRACTION OIL & GAS, INC. | |
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By: |
/s/ Russell T. Kelley |
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Name: Russell T. Kelley, Jr. |
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Title: Chief Financial Officer |
Signature Page to Underwriting Agreement
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written.
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CREDIT SUISSE SECURITIES (USA) LLC | ||
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By: |
/s/ Sean Tobin | |
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Name: |
Sean Tobin |
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Title: |
Director |
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Acting on behalf of itself and as a Representative of the several Underwriters. |
Signature Page to Underwriting Agreement
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written.
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BARCLAYS CAPITAL INC. | ||
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By: |
/s/ Crystal A. Simpson | |
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Name: |
Crystal A. Simpson |
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Title: |
Managing Director |
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Acting on behalf of itself and as a Representative of the several Underwriters. |
Signature Page to Underwriting Agreement
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written.
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GOLDMAN, SACHS & CO. | ||
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By: |
/s/ Daniel Young | |
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Name: |
Daniel Young |
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Title: |
Managing Director |
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Acting on behalf of itself and as a Representative of the several Underwriters. |
Signature Page to Underwriting Agreement
SCHEDULE A
Underwriter |
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Number of |
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Credit Suisse Securities (USA) LLC |
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9,333,333 |
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Barclays Capital Inc. |
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8,500,000 |
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Goldman, Sachs & Co. |
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3,166,667 |
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Citigroup Global Markets Inc. |
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3,166,667 |
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KeyBanc Capital Markets Inc. |
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1,583,333 |
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SunTrust Robinson Humphrey, Inc. |
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1,583,333 |
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Wells Fargo Securities, LLC |
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1,583,333 |
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RBC Capital Markets, LLC |
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1,583,333 |
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Tudor, Pickering, Holt & Co. Securities, Inc. |
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1,000,000 |
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Heikkinen Energy Securities, LLC |
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1,000,000 |
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Stephens Inc. |
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333,333 |
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ABN AMRO Securities (USA) LLC |
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166,667 |
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Fifth Third Securities, Inc. |
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166,667 |
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BOK Financial Securities, Inc. |
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166,667 |
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Total |
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33,333,333 |
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SCHEDULE B
1. General Use Free Writing Prospectuses (included in the General Disclosure Package)
General Use Issuer Free Writing Prospectus includes each of the following documents:
1. None.
2. Other Information Included in the General Disclosure Package
The following information is also included in the General Disclosure Package:
Price per share to the public: $19.00
SCHEDULE C
Subsidiaries
Entity |
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Jurisdiction of Incorporation/Formation |
7N, LLC |
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Delaware |
8 North, LLC |
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Delaware |
Elevation Midstream, LLC |
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Delaware |
Extraction Finance Corp. |
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Delaware |
Mountaintop Minerals, LLC |
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Delaware |
XOG Services, LLC |
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Delaware |
XOG Services, Inc. |
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Colorado |
XTR Midstream, LLC |
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Delaware |
SCHEDULE D
Jurisdictions of Foreign Qualification
Entity |
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Jurisdiction(s) |
7N, LLC |
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Colorado |
8 North, LLC |
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Colorado, Wyoming |
Elevation Midstream, LLC |
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Colorado |
Extraction Finance Corp. |
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None |
Mountaintop Minerals, LLC |
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Colorado |
XOG Services, LLC |
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Colorado, Texas, Wyoming |
XOG Services, Inc. |
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None |
XTR Midstream, LLC |
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Colorado, Wyoming |
SCHEDULE E
Form of Vinson & Elkins L.L.P. Opinion
1. The Company is validly existing and in good standing under the laws of Delaware, with the corporate power and authority to own or lease its properties and conduct its business as described in the General Disclosure Package and the Final Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing in the States of Colorado, Texas and Wyoming.
2. Each subsidiary of the Company other than XOG Services, Inc. (the Delaware Subsidiaries) is validly existing and in good standing under the laws of the jurisdiction of its formation or incorporation, as applicable, with power and authority (corporate and other) to own its properties and conduct its business as described in the General Disclosure Package; and each of the Delaware Subsidiaries is duly qualified to do business as a foreign corporation in good standing in all jurisdictions listed on Schedule I to such opinion in which its ownership or lease of property or the conduct of its business requires such qualification.
3. The Offered Securities to be issued and sold by the Company to the Underwriters under the Underwriting Agreement have been duly authorized in accordance with the Companys Certificate of Incorporation and Bylaws (together, the Governing Documents) and, when issued and delivered by the Company to the Underwriters upon payment therefor in accordance with the Underwriting Agreement, will be validly issued in accordance with the Governing Documents, free of preemptive rights under federal law, the Delaware General Corporation Law (the DGCL) or the Governing Documents, fully paid and non-assessable.
4. Except as set forth in the General Disclosure Package and the Final Prospectus, there are no persons with registration rights or other similar rights described in or created pursuant to any agreement filed as an exhibit to the Registration Statement to have any securities registered pursuant to the Registration Statement or registered by the Company under the Securities Act of 1933 (the Securities Act) or otherwise; and, except as set forth in the General Disclosure Package and the Final Prospectus, no options, warrants or other rights to purchase, agreements or other obligations to issue, or convert any obligations into or exchange any securities for, shares of capital stock of or ownership interests in the Company described in or created pursuant to any agreement filed as an exhibit to the Registration Statement are outstanding.
5. The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Underwriting Agreement and to issue and sell the Offered Securities.
6. The Underwriting Agreement has been duly authorized, executed and delivered by the Company.
7. None of the issuance and sale of the Offered Securities, the execution, delivery and performance of the Underwriting Agreement by the Company or the consummation of the transactions contemplated thereby, and the application of the proceeds from the sale of the Offered Securities as described under Use of Proceeds in the General Disclosure Package and the Final Prospectus will (a) result in a breach or result in a default (or an event that, with notice or lapse of time or both, would constitute such an event) under the Amended and Restated Credit Agreement; (b) violate the provisions of the limited liability company agreement, charter or by-laws (or similar organizational documents) of the Company or the Delaware Subsidiaries or (c) violate any federal (based on the limitations set forth in such opinion) rule or regulation applicable to the Company, or the DGCL, except, with respect to clauses (a) and (c), as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; it being understood that we express no opinion in clause (c) of this paragraph (7) with respect to any federal or state securities, Blue Sky or anti-fraud laws, rules or regulations.
8. The Registration Statement has been declared effective under the Act; to our knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or threatened by the Commission; and any required filing of the Final Prospectus pursuant to Rule 424(b) under the Act has been made in the manner and within the time period required by such rule.
9. The Reorganization Transactions have been duly authorized by Holdings and the Company (together, the Company Parties).
10. Each of Stakeholders Agreement and the Agreement and Plan of Merger has been duly authorized, executed and delivered by the Company Parties and constitutes a valid and legally binding agreement of each of the Company Parties, and, assuming due authorization, execution and delivery by the parties thereto other than the Company Parties, is enforceable against the Company Parties in accordance with its terms, except as enforceability may be limited (A) by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws affecting the enforcement of creditors rights generally or by equitable principles (whether considered in a proceeding at law or in equity) relating to enforceability and (B) public policy, applicable law relating to fiduciary duties and indemnification and an implied covenant of good faith and fair dealing.
11. Except as described in the General Disclosure Package and the Final Prospectus, no consent, approval, authorization or order of, registration or qualification with any U.S. Federal or Delaware court or governmental agency is required to be obtained or made by the Company for the execution, delivery and performance by the Company of the Underwriting Agreement, the compliance by the Company with the terms thereof and the issuance and sale of the Offered Securities by the Company, being delivered on the date hereof pursuant to the Underwriting Agreement, except (a) as have been obtained or made, (b) for the registration of the offering and sale of the Offered Securities under the Securities Act, (c) for such consents, approvals, authorizations, orders, registrations or qualifications as may be required under applicable federal or state securities or Blue Sky laws and the approval by FINRA of the underwriting terms and arrangements in connection with the purchase and distribution of the Offered Securities by the Underwriters or (d) for such consents that, if not obtained, have not or would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
12. The statements set forth in the General Disclosure Package and the Final Prospectus under the headings BusinessRegulation of the Oil and Gas Industry, BusinessRegulation of Environmental and Occupational Safety and Health Matters, Description of Capital Stock and Shares Eligible for Future Sale and in the Registration Statement in Item 14, to the extent that they constitute descriptions or summaries of the terms of the Offered Securities or the documents referred to therein, or refer to statements of federal law, the laws of the State of Delaware or legal conclusions, are accurate in all material respects, subject to the assumptions and qualifications set for therein.
13. The statements contained in the General Disclosure Package and the Final Prospectus under the caption Material U.S. Federal Income Tax Considerations for Non-U.S. Holders, insofar as they purport to constitute summaries of matters of United States federal tax law and regulations or legal conclusions with respect thereto, constitute accurate summaries of the matters described therein in all material respects, subject to the assumptions and qualifications set for therein.
14. The Company is not, and after giving effect to the offer and sale of the Offer Securities pursuant to the terms of the Underwriting Agreement and application of the net proceeds therefrom as described in the General Disclosure Package and the Final Prospectus under the caption Use of Proceeds, will not be, an investment company as defined in the Investment Company Act.
15. Each of the Registration Statement, at the time it was declared effective, the General Disclosure Package, as of the Applicable Time, and the Final Prospectus, when filed with the Commission pursuant to Rule 424(b) under the Securities Act and at the Closing Date (in each case other than (a) the financial statements and related schedules, including the notes and schedules thereto and the auditors report thereon, (b) the other financial data derived therefrom and (c) oil and natural gas reserve data or reports, in each case included in or omitted from the Registration Statement, the General Disclosure Package and the Prospectus, as to which we express no opinion), appeared on their face to comply as to form in all material respects with the requirements of the Securities Act.
We have participated in conferences with representatives of the Company and with representatives of its independent accountants and counsel for the Underwriters at which conferences the contents of the General Disclosure Package and the Final Prospectus and any amendment and supplement thereto and related matters were
discussed. Although we have not independently verified, are not passing upon, and are not assuming any responsibility for or expressing any opinion regarding the accuracy, completeness, or fairness of the statements contained in, the General Disclosure Package and the Final Prospectus (except to the extent specified in paragraphs (12) and (13) above), based on the foregoing, in participation in this transaction (and relying as to materiality as to factual matters on officers, employees, and other representatives of the Company), no facts have come to our attention that have caused us to believe that:
(a) the Registration Statement, at the time it was declared effective (including the information, if any, deemed pursuant to Rule 430A to be part of the Registration Statement at the time of effectiveness), contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein not misleading;
(b) the General Disclosure Package, as of the Applicable Time, included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or
(c) the Final Prospectus, as of its date and as of the date hereof, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
except that in each case such counsel need not express any belief with respect to (i) the financial statements and related schedules, including the notes and schedules thereto and the auditors report thereon, (ii) any other financial or accounting information; or (iii) any oil and natural gas reserve data or reports, in each case included in or omitted from the Registration Statement, the General Disclosure Package and the Prospectus.
SCHEDULE F
Form of Opinion of Colorado Counsel of the Company
1. XOG Services Inc. has been duly incorporated and is existing and in good standing under the laws of the State of Colorado, with power and authority (corporate and other) to own its properties and conduct its business as described in the General Disclosure Package; and is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification; all of the issued and outstanding capital stock of XOG Services Inc. has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of XOG Services Inc. is owned free from liens, encumbrances and defects; and
2. None of the issuance and sale of the Offered Securities, the execution, delivery and performance of the Underwriting Agreement by the Company or the consummation of the transactions contemplated thereby, and the application of the proceeds from the sale of the Offered Securities as described under Use of Proceeds in the General Disclosure Package and the Final Prospectus will violate the provisions of the by-laws of XOG Services Inc., except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
SCHEDULE G
Parties Signing Lock-Up Agreement
YT Extraction Co Investment Partners, LP
Yorktown Energy Partners X, L.P.
Yorktown Energy IX, L.P.
Yorktown Energy Partners XI, L.P.
Bronco Investments (EQ), LLC
NB PEP Holdings Limited
NB Crossroads XX- MC Holdings LP
NB Sauger Fund Limited Partnership
NBSCIP II Extraction Holdings
NB SOF III Holdings LP
BlackRock Inc.
Mark A. Erickson
Matthew R. Owens
Russell T. Kelley, Jr.
John S. Gaensbauer
Peter A. Leidel
Marvin Chronister
Patrick D. OBrien
SCHEDULE H
Schedule of Written Testing-the-Waters Communication
Extraction Oil & Gas, LLC Company Overview May 2016
Exhibit A
Form of Press Release
Extraction Oil & Gas, Inc.
[Date]
Extraction Oil & Gas (Company) announced today that Credit Suisse Securities (USA) LLC, Barclays Capital Inc. and Goldman, Sachs & Co., the lead book-running managers in the Companys recent public sale of shares of common stock, are [waiving] [releasing] a lock-up restriction with respect to shares of the Companys common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on , 20 , and the shares may be sold on or after such date.
This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.
Exhibit B
Form of Lock-Up Letter
Extraction Oil & Gas, Inc.
370 17th Street, Suite 5300
Denver, Colorado 80202
Credit Suisse Securities (USA) LLC
Barclays Capital Inc.
Goldman, Sachs & Co.
As Representatives of the Several Underwriters
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue,
New York, New York 10010-3629
c/o Barclays Capital Inc.
745 Seventh Avenue
New York, New York 10019
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Dear Sirs:
As an inducement to the Underwriters to execute the Underwriting Agreement (the Underwriting Agreement), pursuant to which an offering will be made that is intended to result in the establishment of a public market for the common stock, par value $0.01 per share (the Securities), of Extraction Oil & Gas, Inc., and any successor (by merger or otherwise) thereto (the Company), the undersigned hereby agrees that during the period specified in the following paragraph (the Lock-Up Period), the undersigned will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any Securities or securities convertible into or exchangeable or exercisable for any Securities, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Securities, whether any such aforementioned transaction is to be settled by delivery of the Securities or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse Securities (USA) LLC, Barclays Capital Inc. and Goldman, Sachs & Co. (collectively, the Representatives). In addition, the undersigned agrees that, without the prior written consent of the Representatives, it will not, during the Lock-Up Period, make any demand for or exercise any right with respect to, the registration of any Securities or any security convertible into or exercisable or exchangeable for the Securities.
The Lock-Up Period will commence on the date of this Lock-Up Agreement and continue and include the date 180 days after the public offering date set forth on the final prospectus used to sell the Securities (the Public Offering Date) pursuant to the Underwriting Agreement.
Any Securities received upon exercise of options or other securities of the Company granted to the undersigned and any Securities acquired by the undersigned in the open market will also be subject to this Lock-Up Agreement. However, the restrictions in this Lock-Up Agreement shall not apply to (a) any transactions relating to Securities acquired in the open market after the closing of the offering, provided that with respect to any sale or other disposition of such Securities, no filing under the Securities Exchange Act of 1934 (the Exchange Act) (other than on Form 5) or other public announcement shall be required or shall be voluntarily made by any party in connection with subsequent sales of such Securities acquired in such open
market transactions during the Lock-Up Period, (b) any exercise of options or vesting or exercise of any other equity-based award, in each case under the Companys equity incentive plan or any other plan or agreement described in the prospectus included in the Registration Statement, provided that any Securities received upon such exercise or vesting will also be subject to this Lock-Up Agreement, (c) transfers as a bona fide gift or gifts, (d) transfers to a family member, trust, family limited partnership or family limited liability company for the direct or indirect benefit of the undersigned or his or her family members, (e) transfers by testate or intestate succession, provided that in each transfer pursuant to clauses (c)-(e) the transferee agrees to be bound in writing by the terms of this Lock-Up Agreement prior to such transfer, such transfer shall not involve a disposition for value and no filing or public announcement by any party (donor, donee, transferor or transferee) under the Exchange Act or otherwise shall be required or shall be voluntarily made in connection with such transfer (other than a filing on a Form 5), or (f) the establishment of any written contract, instruction or plan that satisfies all of the requirements of Rule 10b5-1 (a Rule 10b5-1 Plan) under the Exchange Act; provided, however, that no sales of Securities or securities convertible into, or exchangeable or exercisable for, Securities, shall be made pursuant to a Rule 10b5-1 Plan prior to the expiration of the Lock-Up Period (as the same may be extended pursuant to the provisions hereof); and provided further, that no party is required to publicly announce, file, or report the establishment of such Rule 10b5-1 Plan in any public report, announcement, or filing with the Commission under the Exchange Act during the Lock-Up Period and does not otherwise voluntarily effect any such public report, announcement, or filing regarding such Rule 10b5-1 Plan.
In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of shares of Securities if such transfer would constitute a violation or breach of this Lock-Up Agreement.
If the undersigned is an officer or director of the Company, (i) the Representatives agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Securities, the Representatives will notify the Company of the impending release or waiver, and (ii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by the Representatives hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this Lock-Up Agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.
This Lock-Up Agreement shall be binding on the undersigned and the successors, heirs, personal representatives and assigns of the undersigned.
It is understood that if the Underwriting Agreement is executed yet terminates (other than the provisions thereof that survive termination) prior to payment for and delivery of the Offered Securities, the undersigned shall be released from all obligations under this Lock-Up Agreement. Further, this Lock-Up Agreement shall lapse and become null and void if the Public Offering Date shall not have occurred on or before December 31, 2016. This agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
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Very truly yours, |
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[Name of officer, director or stockholder] |
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
EXTRACTION OIL & GAS, INC.
FIRST: The name of the Corporation is Extraction Oil & Gas, Inc. (the Corporation).
SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The name of the registered agent of the Corporation at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the DGCL).
FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 950,000,000 shares of capital stock, which shall be divided into two classes, consisting of (i) 50,000,000 shares of preferred stock, par value $0.01 per share (Preferred Stock), and (ii) 900,000,000 shares of common stock, par value $0.01 per share (Common Stock). The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of capital stock of the Corporation representing a majority of the voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon, irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto).
The designations and the powers, preferences, rights, qualifications, limitations and restrictions of the Preferred Stock and Common Stock are as follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in one or more series, the shares of each series to have such voting powers (full or limited, or no voting powers), and such designations, preferences, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed herein or in any amendment hereto or in the resolution or resolutions providing for the issue of such series adopted by the Corporations Board of Directors (the Board) as hereinafter prescribed and set forth in a certificate of designations filed with the Secretary of State of the State of Delaware as required by the DGCL (a Preferred Stock Designation).
(b) The shares of each series of the Preferred Stock may vary from the shares of any other series thereof in any or all of the foregoing respects. The Board may increase the number of shares of Preferred Stock designated for any existing series of Preferred Stock in a Preferred Stock Designation by a resolution adding to such series authorized and unissued shares of Preferred Stock not designated for any other series of Preferred Stock. The Board may decrease the number of shares of Preferred Stock designated for any existing series of Preferred
Stock in a Preferred Stock Designation (but not below the number of shares then outstanding) by a resolution subtracting from such series authorized and unissued shares of Preferred Stock designated for such
existing series and, unless otherwise provided in the Preferred Stock Designation of such series, the shares so subtracted shall become authorized and unissued shares of Preferred Stock, undesignated as to series.
(c) Except as otherwise provided by law or in a Preferred Stock Designation, the holders of Preferred Stock will not be entitled to vote at or receive notice of any meeting of the stockholders.
2. Provisions Relating to the Common Stock.
(a) Except as otherwise provided by law or in a Preferred Stock Designation, the holders of Common Stock, as such, shall be entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders, the holders of Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes and the holders of Preferred Stock shall not be entitled to vote at or receive notice of any meeting of stockholders.
(b) Except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Preferred Stock Designation) that relates solely to the terms of any outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Preferred Stock Designation) or pursuant to the DGCL.
(c) Subject to preferences that may be applicable to any outstanding shares or series of Preferred Stock, holders of Common Stock, as such, are entitled to receive ratably such dividends (payable in cash, stock or otherwise), if any, as may be declared from time to time by the Board out of funds legally available therefor.
(d) In the event of any liquidation, dissolution or winding-up of the Corporation, holders of Common Stock, as such, will be entitled to share ratably in the assets of the Corporation that are remaining after payment or provision for payment of all debts and obligations of the Corporation and of preferential amounts payable to holders of outstanding shares of Preferred Stock, if any.
FIFTH: The business and affairs of the Corporation shall be managed by or under the direction of the Board. The directors, other than those who may be elected by the holders of any series of Preferred Stock specified in the related Preferred Stock Designation, shall be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as is reasonably possible, with the initial term of office of the first class to expire at the 2017 annual meeting (the Class I Directors), the initial term of office of the second class to expire at the 2018 annual meeting (the Class II Directors), and the initial term of office of the third class to expire at the 2019 annual meeting (the Class III Directors), with each director to hold office until his successor shall have been duly elected and qualified. At each annual meeting of stockholders, directors elected to succeed those directors whose terms then expire shall be
elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his successor shall have been duly elected and qualified. The Board is authorized to assign members of the Board already in office to Class I, Class II or Class III. Subject to applicable law and the rights of the holders of any series of Preferred Stock, any newly created directorship that results from an increase in the number of directors or any vacancy on the Board that results from the death, disability, resignation, disqualification or removal of any director or from any other cause shall be filled solely by the affirmative vote of a majority of the total number of directors then in office, even if less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall hold office for the remaining term of his predecessor. No decrease in the number of authorized directors constituting the Board shall shorten the term of any incumbent director.
Subject to the rights of the holders of shares of any series of Preferred Stock, if any, to elect additional directors pursuant to this Certificate of Incorporation (including any Preferred Stock Designation thereunder), any director may be removed only for cause, upon the affirmative vote of the holders of at least 66 2/3% of the outstanding shares of stock of the Corporation entitled to vote generally for the election of directors, acting at a meeting of the stockholders in accordance with the DGCL, this Certificate of Incorporation and the bylaws of the Corporation (as the same may be amended and/or restated from time to time, the Bylaws). Except as applicable law otherwise provides, cause for the removal of a director shall be deemed to exist only if the director whose removal is proposed: (i) has been convicted of a felony by a court of competent jurisdiction and that conviction is no longer subject to direct appeal; (ii) has been found to have been grossly negligent in the performance of his duties to the Corporation in any matter of substantial importance to the Corporation by the affirmative vote of at least 80% of the directors then in office or a court of competent jurisdiction; or (iii) has been adjudicated by a court of competent jurisdiction to be mentally incompetent, which mental incompetency directly affects his ability to serve as a director of the Corporation.
Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, if any, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the total number of directors then in office. Unless and except to the extent that the Bylaws so provide, the election of directors need not be by written ballot.
SIXTH: Special meetings of stockholders of the Corporation may be called only by the Board pursuant to resolutions adopted by a majority of the total number of directors then in office.
SEVENTH: The Board shall have the power to adopt, amend or repeal the bylaws of the Corporation (as the same may be amended and/or restated from time to time, the Bylaws). In addition to any separate vote of the Preferred Stock or any series thereof required hereby or by any Preferred Stock Designation, the stockholders of the Corporation may adopt, amend or repeal the Bylaws only by an affirmative vote of the holders of at least 662/3% of the outstanding shares of Common Stock. No Bylaws hereafter made or adopted, nor any repeal of or amendment thereto, shall invalidate any prior act of the Board that was valid at the time it was taken.
EIGHTH: No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the directors duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. Without limiting the effect of the preceding sentence, if the DGCL is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended. Any amendment, repeal or modification of this Article EIGHTH shall be prospective only and shall not affect any limitation on liability of a director for acts or omissions occurring prior to the date of such amendment, repeal or modification.
NINTH: Any action required or permitted to be taken by the stockholders of the Corporation must be taken at a duly called and convened annual or special meeting of stockholders and may not be taken by any consent in writing in lieu of a meeting of such stockholders.
TENTH: In addition to any other vote that may be required by law, this Certificate of Incorporation (including any Preferred Stock Designation) or the Bylaws, the affirmative vote of the holders of at least 662/3% of the outstanding shares of Common Stock shall be required to amend, alter or repeal Articles FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH, ELEVENTH, TWELFTH, OR THIRTEENTH, or this Article TENTH, of this Certificate of Incorporation, or to adopt any provision of the Certificate of Incorporation or Bylaws inconsistent therewith.
ELEVENTH: To the fullest extent permitted by applicable law, the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in any business opportunity, transaction or other matter in which (i) Yorktown Partners LLC (Yorktown) or any investment fund sponsored or managed by Yorktown, including any fund still to be formed, or any of its or their respective officers, directors, partners, employees, affiliates and any portfolio company in which such entities or persons have an equity interest (other than the Corporation and its subsidiaries) or (ii) any non-employee director of the Corporation and any of his or her affiliates (other than the Corporation and its subsidiaries) (each of (i) and (ii), a Specified Party) participates or desires or seeks to participate and that involves any aspect of the energy business or industry, even if the opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so and each such Specified Party shall have no duty to communicate or offer such business opportunity to the Corporation. Notwithstanding the foregoing, the Corporation, on behalf of itself and its subsidiaries, does not hereby renounce any interest or expectancy it or its subsidiaries may have in any business opportunity, transaction or other matter that is offered in writing solely to (1) a director or officer of the Corporation or its subsidiaries who is not also a Specified Party, or (2) a Specified Party who is a director, officer or employee of the Corporation who is offered such opportunity solely in his or her capacity as a director, officer or employee of the Corporation.
To the fullest extent permitted by law, (a) neither the amendment nor repeal of this Article ELEVENTH, nor the adoption of any provision in this Certificate of Incorporation or the
Bylaws, nor any modification of law shall adversely affect any right or protection of any person granted pursuant hereto existing at, or arising out of or related to any event, act or omission that occurred prior to, the time of such amendment, repeal, adoption or modification, and (b) if any provision or provisions of this Article ELEVENTH shall be held invalid, illegal or unenforceable as applied to any circumstances for any reason whatsoever, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article ELEVENTH (including, without limitation, each portion of any paragraph of this Article ELEVENTH containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby.
This Article ELEVENTH shall not be deemed to limit any protections or defenses available to, or rights to indemnification or advancement of expenses of, any director or officer of the Corporation under this Certificate of Incorporation, the Bylaws, any other agreement or applicable law. Any person or entity purchasing or otherwise acquiring any interest in any securities of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article ELEVENTH.
TWELFTH: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim for a breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporations stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, this Certificate of Incorporation or the Bylaws, including any action to interpret, apply, enforce or determine the validity of this Certificate of Incorporation or the Bylaws, or any provision hereof or thereof, or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in any securities of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article TWELFTH.
If any provision or provisions of this Article TWELFTH shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article TWELFTH (including, without limitation, each portion of any sentence of this Article TWELFTH containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.
To the fullest extent permitted by law, if any action the subject matter of which is within the scope of this Article TWELFTH above is filed in a court other than a court located within the State of Delaware (a Foreign Action) in the name of any stockholder, such stockholder shall be deemed to have consented to (A) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce this Article TWELFTH (an FSC Enforcement Action) and (B) having service of process made
upon such stockholder in any such FSC Enforcement Action by service upon such stockholders counsel in the Foreign Action as agent for such stockholder.
THIRTEENTH: The Corporation elects not to be governed by Section 203 of the DGCL, and the restrictions contained in Section 203 shall not apply to the Corporation.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Incorporation as of this 11th day of October, 2016.
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/s/ Seth Foreman | |
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Seth Foreman |
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370 17th Street, Suite 5300 |
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Denver, Colorado 80202 |
CERTIFICATE OF INCORPORATION OF
EXTRACTION OIL & GAS, INC.
SIGNATURE PAGE
Exhibit 3.2
BYLAWS
OF
EXTRACTION OIL & GAS, INC.
Incorporated under the Laws of the State of Delaware
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. Registered Office. The registered office of the Corporation in the State of Delaware, and the name of its registered agent at such location, shall be as set forth in the Certificate of Incorporation and may be changed from time to time by the board of directors of the Corporation (the Board of Directors) in the manner provided by law.
SECTION 1.2. Other Offices. The Corporation may have such other offices, either within or without the State of Delaware, as the Board of Directors may designate or as the business of the Corporation may from time to time require.
SECTION 1.3. Books and Records. The books and records of the Corporation may be kept outside the State of Delaware at such place or places as may from time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. Annual Meeting. An annual meeting of the stockholders of the Corporation shall be held for the election of directors on such date and time as may be determined from time to time by resolution of the Board of Directors. Any other proper business may be transacted at the annual meeting. The Board of Directors may postpone, reschedule or cancel any annual meeting of stockholders previously scheduled by the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of stockholders. The meeting may be postponed or rescheduled to such time and place as is specified in the notice of postponement or rescheduling of such meeting.
SECTION 2.2. Special Meeting. Special meetings of the stockholders may be called only in accordance with the Corporations Certificate of Incorporation as it may be amended and/or restated from time to time (the Certificate of Incorporation), including any certificate of designations with respect to any series of stock having a preference over the common stock of the Corporation as to dividends or upon liquidation (Preferred Stock). The Board of Directors may postpone, reschedule or cancel any special meeting of stockholders previously scheduled by the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of stockholders. The meeting may be postponed or rescheduled to such time and place as is specified in the notice of postponement or rescheduling of such meeting.
SECTION 2.3. Place of Meeting; Remote Communication. Any annual or special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board of Directors, in its sole discretion, may determine. If no designation is so made, the meeting shall be held at the principal executive offices of the Corporation.
SECTION 2.4. Notice of Meeting. Notice of all meetings of stockholders shall be given in writing or by electronic transmission in accordance with applicable law stating the place, if any, date and time of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation, such notice shall be given by the Corporation not less than 10 days nor more than 60 days before the date of the meeting, in a manner permitted by Section 6.7 of these Bylaws, to each stockholder of record entitled to vote at such meeting as of the record date for determining stockholders entitled to notice of such meeting. Such further notice shall be given as may be required by law.
SECTION 2.5. Quorum and Adjournment. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the outstanding shares of the Corporation entitled to vote generally in the election of directors (the Voting Stock), present in person or represented by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series (or classes or series) of stock voting as a class or series (or classes or series), the holders of a majority of the outstanding shares of such class or series (or classes or series), present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to the vote on such business. The Chairman of the Meeting or the holders of a majority of the shares so represented may adjourn or recess the meeting from time to time for any reasonable reason, whether or not there is such a quorum. At the adjourned or recessed meeting, the Corporation may transact any business which might have been transacted at the original meeting. Notice of any adjourned or recessed meeting need not be given if the time, date and place, if any, and the means of remote communication, if any, by which stockholders may be deemed present in person and vote at such adjourned or recessed meeting are announced at the meeting at which the adjournment or recess is taken; provided, however, that if the adjournment or recess is for more than 30 days, a notice of the adjourned or recessed meeting shall be given to each stockholder of record entitled to vote at the meeting; provided, further, that if after the adjournment or recess a new record date for stockholders entitled to vote is fixed for the adjourned or recessed meeting, the Board of Directors shall fix a new record date for notice of such adjourned or recessed meeting (which record date for determining stockholders entitled to notice of such adjourned or recessed meeting shall be the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned or recessed meeting), and shall give notice of the adjourned or recessed meeting to each stockholder of record as of the record date so fixed for notice of such adjourned or recessed meeting. The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment or recess, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
SECTION 2.6. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to take action by written consent without a meeting may authorize another person or persons to act for such stockholder by proxy. Such proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Any copy, facsimile transmission or other reliable reproduction of the writing or transmission created pursuant to this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile transmission or other reproduction shall be a complete reproduction of the entire original writing or transmission.
SECTION 2.7. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporations notice of meeting (or any supplement thereto), (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who (i) was a stockholder of record at the time of giving of notice provided for in this Section 2.7 and at the time of the annual meeting, (ii) is entitled to vote at the meeting and (iii) complies with the notice procedures set forth in these Bylaws as to such business or nomination and applicable law; clause 1(c) of this Section 2.7(A) shall be the exclusive means for a stockholder to make nominations of director nominees or submit other business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the Exchange Act), and included in the Corporations notice of meeting) before an annual meeting of the stockholders.
(2) For any nominations of director nominees or any other business to be properly brought before an annual meeting by a stockholder pursuant to Section 2.7(A)(1)(c) of these Bylaws, the stockholder must have given timely notice thereof in writing to the Secretary and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholders notice shall be delivered in writing to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding years annual meeting (which anniversary, in the case of the first annual meeting of stockholders following the close of the Corporations initial public offering, shall be deemed to be May 1, 2017); provided, however, that in the event that the date of the annual meeting is scheduled for a date that is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting. In no event shall any adjournment, recess or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholders notice as described above.
(3) To be in proper form, a stockholders notice (whether given pursuant to this Section 2.7(A)(2) or Section 2.7(B)) to the Secretary must:
(a) set forth, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (including any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act) of such stockholder or beneficial owner) (i) the name and address of such stockholder, as they appear on the Corporations books, and of such beneficial owner, if any, (ii) (A) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record (within the meaning of Rule 13d-3 under the Exchange Act) by such stockholder and such beneficial owner, if any (except that any such person shall in all events be deemed to beneficially own any shares of any class or series of the corporation as to which such person has a right to acquire beneficial ownership at any time in the future), (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a Derivative Instrument) directly or indirectly owned beneficially by such stockholder and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation, (C) a description of any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder and such beneficial owner has a right to vote any shares of any security of the Corporation, (D) any short interest in any security of the Corporation (for purposes of these Bylaws a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (E) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder that are separated or separable from the underlying shares of the Corporation, (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (G) any performance-related fees (other than an asset-based fee) to which such stockholder is entitled based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of such stockholders immediate family sharing the same household (which information shall be supplemented by such stockholder and beneficial owner, if any, not later than 10 days after the record date for the meeting to disclose such ownership as of the record date), (iii) any other information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder, (iv) a representation that the stockholder is, and was at all relevant times, a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to bring such nomination or other business before the meeting, and (v) a representation as to whether such stockholder or any such beneficial owner intends or is part of a group that intends to (x) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the voting power of the Corporations outstanding capital stock required to approve or adopt the proposal or to elect each such nominee and/or (y) otherwise solicit proxies from stockholders in support of such proposal or nomination.
(b) if the notice relates to any business other than a nomination of a director or directors that the stockholder proposes to bring before the meeting, set forth (i) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such stockholder and beneficial owner, if any, in such business, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration) and (iii) a complete and accurate description of all agreements, arrangements and understandings between such stockholder and such beneficial owner, if any, and any other person or persons (including their names and addresses) in connection with the proposal of such business by such stockholder;
(c) set forth, as to each person, if any, whom the stockholder proposes to nominate for election or reelection to the Board of Directors (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such person, (iv) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such persons written consent to being named in the proxy statement as a nominee and to serving as a director if elected) and (v) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Exchange Act if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the registrant for purposes of such Item 404 and the nominee were a director or executive officer of such registrant; and
(d) with respect to each nominee for election or reelection to the Board of Directors, include a completed and signed questionnaire, representation and agreement required by Section 2.9 of these Bylaws. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholders understanding of the independence, or lack thereof, of such nominee.
(B) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting by or at the direction of the Board of Directors pursuant to the Corporations notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporations notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who (i) is a stockholder of record at the time of giving of notice provided for in these Bylaws and on the record date for determination of stockholders entitled to vote at such meeting, (ii) is entitled to vote at the meeting, and (iii) complies with the notice procedures set forth in these Bylaws and applicable law. In the event a special meeting of stockholders is called for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporations notice of meeting. In no event shall any adjournment, recess or postponement of a special meeting or any announcement thereof commence a new time period for the giving of a stockholders notice as described above.
(C) General.
(1) Only such persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as has been brought before the meeting in accordance with the procedures set forth in these Bylaws and applicable law. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the Chairman of the Meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and applicable law and, if any proposed nomination or business is not in compliance with these Bylaws and applicable law, to declare that such defective proposal or nomination shall be disregarded.
(2) Notwithstanding the foregoing provisions of these Bylaws, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in these Bylaws; provided, however, that any references in these Bylaws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to these Bylaws. For purposes of these Bylaws, public announcement shall mean
disclosure in a press release reported by Dow Jones News Service, the Associated Press, or any other national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.
(3) A stockholder providing notice of business or any nomination proposed to be brought before a meeting shall further update and supplement such notice, so that the information provided or required to be provided in such notice pursuant to this Section 2.7 of these Bylaws shall be true and correct (a) as of the record date for the meeting and (b) as of the date that is ten (10) business days prior to the meeting or any adjournment, recess, rescheduling or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary at the principal executive offices of the corporation not later than five (5) business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date) and not later than seven (7) business days prior to the date for the meeting, if practicable (or, if not practicable, on the first practicable date prior to) or any adjournment, recess, rescheduling or postponement thereof (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment, recess, rescheduling or postponement thereof).
(4) Nothing in these Bylaws shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporations proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock if and to the extent provided for under law, the Certificate of Incorporation or these Bylaws.
SECTION 2.8. Conduct of Business. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate in its sole discretion. The Chairman of the Board, if one shall have been elected, or in the Chairman of the Boards absence or if one shall not have been elected, the director designated by the majority of directors, shall preside at all meetings of the stockholders as Chairman of the Meeting. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the Chairman of the Meeting may prescribe such rules, regulations and procedures and do all such acts as, in the judgment of such Chairman of the Meeting, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the Chairman of the Meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the Chairman of the Meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) restrictions on the use of audio or video recording devices at the meeting; and (f) limitations on the time allotted to questions or comments by participants. Should any person in attendance become unruly or obstruct the meeting proceedings, the Chairman of the Meeting shall have the power to have such person removed from the meeting. The Chairman of the Meeting at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the
meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if the Chairman of the Meeting should so determine, the Chairman of the Meeting shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the Chairman of the Meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Article II.
SECTION 2.9. Submission of Questionnaire; Representation and Agreement. To be eligible to be a nominee for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 2.7 of these Bylaws) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (A) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a Voting Commitment) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such persons ability to comply, if elected as a director of the Corporation, with such persons fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (C) in such persons individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.
SECTION 2.10. Procedure for Election of Directors; Required Vote. Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, a plurality of the votes cast by the stockholders entitled to vote on the election of directors shall be sufficient to elect directors. Unless otherwise provided in the Certificate of Incorporation, cumulative voting for the election of directors shall be prohibited. Except as otherwise provided by applicable law, the Certificate of Incorporation, the rules and regulations of any stock exchange applicable to the Corporation, or these Bylaws, in all matters other than the election of directors and certain non-binding advisory votes described below, the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the stockholders. In non-binding advisory matters with more than two possible vote choices, the affirmative vote of a plurality of the voting power of the outstanding shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the recommendation of the stockholders.
SECTION 2.11. Inspectors of Elections; Opening and Closing the Polls. The Board of Directors by resolution shall appoint one or more inspectors of election to act at the meetings of stockholders and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders, the Chairman of the Meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by law.
The Chairman of the Meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.
SECTION 2.12. Stockholder Action by Written Consent. Any action required or permitted to be taken by the stockholders of the Corporation must be taken at a duly called annual or special meeting of stockholders and may not be taken by any consent in writing in lieu of a meeting of such stockholders.
SECTION 2.13. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before the date of every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting, (i) on a reasonably accessible electronic network (provided that the information required to gain access to the list is provided with the notice of the meeting), or (ii) during ordinary business hours at the principal place of business of the Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. If the meeting is held solely by means of remote communication, then the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting
SECTION 2.14. Fixing Date for Determination of Stockholders of Record for Meetings and Other Matters.
(A) Meetings. In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment or recess thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than sixty (60), nor less than ten (10), days before the date of such meeting. If the Board of Directors so fixes such record date for notice of such meeting, such date shall also be
the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date for notice of such meeting, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, then the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment or recess of the meeting; provided, however, that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned or recessed meeting, and, in such case, shall also fix as the record date for stockholders entitled to notice of such adjourned or recessed meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned or recessed meeting.
(B) Unless otherwise restricted by the Certificate of Incorporation, in order that the Corporation may determine the stockholders entitled to express consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date for determining stockholders entitled to express consent to corporate action in writing without a meeting is fixed by the Board of Directors, (i) when no prior action of the Board of Directors is required by law, the record date for such purpose shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation in accordance with applicable law, and (ii) if prior action by the Board of Directors is required by law, the record date for such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
(C) Other Actions. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action (other than any stockholders entitled to notice of or to vote at a meeting or action by written consent of stockholders), the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than sixty (60) days prior to such action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authorities by these Bylaws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or
by the Certificate of Incorporation or by these Bylaws required to be exercised or done by the stockholders.
SECTION 3.2. Number, Tenure and Qualifications. Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the total number of directors then in office (the Whole Board). No decrease in the authorized number of directors constituting the Whole Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.
SECTION 3.3. Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than these Bylaws immediately after, and at the same place as, the Annual Meeting of Stockholders. Subject to Section 3.5 of these Bylaws, the Board of Directors may, by resolution, provide the time and place for the holding of additional regular meetings.
SECTION 3.4. Special Meetings. Except as otherwise provided by law or by the Certificate of Incorporation and subject to Section 3.5 of these Bylaws, special meetings of the Board of Directors of the Corporation may be called only by the Chairman of the Board, the Chief Executive Officer, the Lead Director, if one has been designated by the Board of Directors, or the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings.
SECTION 3.5. Notice. Notice of any meeting of directors shall be given to each director at his or her business or residence in writing by any means permitted by Section 6.7 of these Bylaws, orally by telephone, by facsimile or by other electronic transmission (including, without limitation, by electronic mail). If delivered by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mail so addressed, postage prepaid, at least five days before such meeting. If delivered by overnight courier service, such notice shall be deemed adequately delivered when the notice is delivered to the overnight courier service company at least 24 hours before such meeting. If delivered by facsimile transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least 24 hours before such meeting. If delivered by telephone or by hand delivery, the notice shall be given at least 24 hours prior to the time set for the meeting. If delivered by electronic mail, the notice shall be deemed adequately delivered when the notice is directed to an electronic mail address at which the director has consented to receive notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 6.3 of these Bylaws.
SECTION 3.6. Action by Consent of Board of Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper
form and shall be in electronic form if the minutes are maintained in electronic form. Such consent shall have the same force and effect as a unanimous vote at a meeting, and may be stated as such in any document or instrument filed with the Secretary of State of the State of Delaware.
SECTION 3.7. Conference Telephone Meetings. Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.
SECTION 3.8. Quorum. Subject to Section 3.9 of these Bylaws, a whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
SECTION 3.9. Vacancies. Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled solely by the affirmative vote of a majority of the total number of directors then in office, even if less than a quorum of the Board of Directors, or by a sole remaining director, and shall not be filled by the stockholders. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall hold office for the remaining term of his predecessor. No decrease in the number of authorized directors constituting the Board shall shorten the term of any incumbent director.
SECTION 3.10. Executive and Other Committees. The Board of Directors may, by resolution adopted by a majority of the Whole Board, designate an Executive Committee to exercise, subject to applicable provisions of law, all the powers of the Board of Directors in the management of the business and affairs of the Corporation when the Board of Directors is not in session, and may, by resolution similarly adopted, designate one or more other committees. The Executive Committee and each such other committee shall consist of one or more directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, other than the Executive Committee (the powers of which are expressly provided for herein), may to the extent permitted by law exercise such powers and shall have such responsibilities as shall be specified in the designating resolution. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Each committee shall keep written minutes of its proceedings and shall report such proceedings to the Board of Directors when required.
A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. Notice of such meetings shall be given to each member of the committee in the manner provided for in Section 3.5 of these Bylaws. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. Nothing herein shall be deemed to prevent the Board of Directors from appointing one or more committees consisting in whole or in part of persons who are not directors of the Corporation; provided, however, that no such committee shall have or may exercise any authority of the Board of Directors.
SECTION 3.11. Removal. Subject to the rights of the holders of any series of Preferred Stock with respect to directors elected by such holders in accordance with the Certificate of Incorporation, any director may be removed from office at any time, but only for cause and in accordance with applicable law and the Certificate of Incorporation.
SECTION 3.12. Records. The Board of Directors shall cause to be kept a record containing the minutes of the proceedings of the meetings of the Board of Directors and of the stockholders, appropriate stock books and registers and such books of records and accounts as may be necessary for the proper conduct of the business of the Corporation.
SECTION 3.13. Compensation. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have authority to fix the compensation of directors, including fees and reimbursement of expenses.
ARTICLE IV
OFFICERS
SECTION 4.1. Elected Officers. The elected officers of the Corporation shall be a Chairman of the Board, a Chief Executive Officer, a President, a Secretary, a Treasurer, and such other officers (including, without limitation, a Chief Financial Officer) as the Board of Directors from time to time may deem proper. The Chairman of the Board shall be chosen from among the directors. All officers elected by the Board of Directors shall have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof. The Board of Directors or any committee thereof may from time to time elect, or the Chairman of the Board or Chief Executive Officer may appoint, such other officers (including one or more Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant Controllers) and such agents as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers and agents shall have such duties and shall hold their offices for such terms as shall be provided in these Bylaws or as may be prescribed by the Board of Directors or such committee or by the Chairman of the Board or Chief Executive Officer, as the case may be. Any number of offices may be held by the same person.
SECTION 4.2. Election and Term of Office. The elected officers of the Corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after the annual meeting of the stockholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified or until his or her death or until he or she shall resign, but any officer may be removed from office at any time by the affirmative vote of a majority of the Whole Board or, except in the case of an officer or agent elected by the Board of Directors, by the Chairman of the Board or Chief Executive Officer. Such removal shall be without prejudice to the contractual rights, if any, of the person so removed.
SECTION 4.3. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors. The Chairman of the Board shall advise and counsel the Chief Executive Officer and other officers and shall exercise such powers and perform such duties as shall be assigned to or required of the Chairman of the Board from time to time by the Board of Directors or these Bylaws. He or she shall make reports to the Board of Directors and the stockholders, and shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect. The Chairman of the Board may also serve as the Chief Executive Officer, if so elected by the Board of Directors.
SECTION 4.4. Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Corporation, shall have general supervision of the affairs of the Corporation and general control of all of its business subject to the ultimate authority of the Board of Directors, and shall be responsible for the execution of the policies of the Board of Directors. In the absence (or inability to act) of the Chairman of the Board and the Lead Director, if one has been designated by the Board of Directors, the Chief Executive Officer (if he or she shall be a director) shall preside when present at all meetings of the stockholders and the Board of Directors.
SECTION 4.5. President. The President shall be the chief operating officer of the Corporation and shall, subject to the authority of the Chief Executive Officer and the Board of Directors, have general management and control of the day-to-day business operations of the Corporation and shall consult with and report to the Chief Executive Officer. The President shall put into operation the business policies of the Corporation as determined by the Chief Executive Officer and the Board of Directors as communicated to the President by the Chief Executive Officer and the Board of Directors. The President shall make recommendations to the Chief Executive Officer on all operational matters that would normally be reserved for the final executive responsibility of the Chief Executive Officer. In the absence (or inability to act) of the Chairman of the Board, the Lead Director, if one has been designated by the Board of Directors, and the Chief Executive Officer, the President (if he or she shall be a director) shall preside when present at all meetings of the stockholders and the Board of Directors.
SECTION 4.6. Vice-Presidents. Each Vice President shall have such powers and shall perform such duties as shall be assigned to him or her by the Board of Directors.
SECTION 4.7. Treasurer. The Treasurer shall exercise general supervision over the receipt, custody and disbursement of corporate funds. The Treasurer shall cause the funds of the Corporation to be deposited in such banks as may be authorized by the Board of Directors, or in such banks as may be designated as depositaries in the manner provided by resolution of the Board of Directors. He or she shall have such further powers and duties and shall be subject to
such directions as may be granted or imposed upon him or her from time to time by the Board of Directors, the Chairman of the Board or the Chief Executive Officer.
SECTION 4.8. Secretary. The Secretary shall keep or cause to be kept in one or more books provided for that purpose, the minutes of all meetings of the Board of Directors, the committees of the Board of Directors and the stockholders; he or she shall see that all notices are duly given in accordance with the provisions of these Bylaws and as required by law; he or she shall be custodian of the records of the Corporation; and he or she shall see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and in general, he or she shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the Board of Directors, the Chairman of the Board or the Chief Executive Officer.
SECTION 4.9. Removal. Any officer elected, or agent appointed, by the Board of Directors may be removed by the affirmative vote of a majority of the Whole Board whenever, in their judgment, the best interests of the Corporation would be served thereby. Any officer or agent appointed by the Chairman of the Board or the Chief Executive Officer may be removed by him or her whenever, in his or her judgment, the best interests of the Corporation would be served thereby. No elected officer shall have any contractual rights against the Corporation for compensation by virtue of such election beyond the date of the election of his or her successor or his or her death, resignation or removal, whichever event shall first occur, except as otherwise provided in an employment contract or under an employee deferred compensation plan.
SECTION 4.10. Vacancies. A newly created elected office and a vacancy in any elected office because of death, resignation, retirement or removal may be filled solely by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors and shall not be filled by the Stockholders. Any vacancy in an office appointed by the Chairman of the Board or the Chief Executive Officer because of death, resignation, retirement or removal may be filled by the Chairman of the Board or the Chief Executive Officer.
SECTION 4.11. Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the Chief Executive Officer or any officer authorized by the Chairman of the Board, the Chief Executive Officer or the President, shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation in which the Corporation may hold securities and otherwise to exercise any and all rights and powers that the Corporation may possess by reason of its ownership of securities in such other corporation.
SECTION 4.12. Delegation. The Board of Directors may from time to time delegate the powers and duties of any officer to any other officer or agent, notwithstanding any provision hereof.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. Stock Certificates and Transfers. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the appropriate officers of the Corporation may from time to time prescribe; provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock may be uncertificated shares. Any such resolutions shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. The shares of the stock of the Corporation shall be transferred on the books of the Corporation, which may be maintained by a third party registrar or transfer agent, by the holder thereof in person or by his or her attorney, upon surrender for cancellation of certificates for at least the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require or upon receipt of proper transfer instructions from the registered holder of uncertificated shares and upon compliance with appropriate procedures for transferring shares in uncertificated form.
Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board, or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.
SECTION 5.2. Ownership of Shares. The Corporation shall be entitled to treat the holder of record of any share or shares of stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by the laws of the State of Delaware.
SECTION 5.3. Lost, Stolen or Destroyed Certificates. No certificate for shares or uncertificated shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation of a bond of indemnity in such amount, upon such terms and secured by such surety, as the Board of Directors or any financial officer may in its or his or her discretion require.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December of each year.
SECTION 6.2. Dividends. Except as otherwise provided by law or the Certificate of Incorporation, the Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares of capital stock, which dividends may be paid in either cash, property or shares of capital stock of the Corporation. A member of the Board of Directors, or a member of any committee designated by the Board of Directors, shall be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors, or by any other person as to matters the director reasonably believes are within such other persons professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation, as to the value and amount of the assets, liabilities or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid.
SECTION 6.3. Waiver of Notice. Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, signed by the person entitled to such notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or the Board of Directors or committee thereof need be specified in any waiver of notice of such meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
SECTION 6.4. Audits. The accounts, books and records of the Corporation shall be audited upon the conclusion of each fiscal year by an independent certified public accountant selected by the Board of Directors, and it shall be the duty of the Board of Directors to cause such audit to be done annually.
SECTION 6.5. Resignations. Any director or any officer, whether elected or appointed, may resign at any time by giving written notice or notice via electronic transmission of such resignation to the Chairman of the Board, the Chief Executive Officer, or the Secretary, and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chairman of the Board, the Chief Executive Officer, or the Secretary, or at such later time as is specified therein. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective.
SECTION 6.6. Indemnification and Insurance.
(A) (1) Each person who was or is a party or is threatened to be made a party to or is involved in any Proceeding (other than a Proceeding by or in the right of the Corporation), by reason of the fact that he or she is or was a director or officer of the Corporation, or, while serving as a director or officer of the Corporation, is or was a director, officer, employee or agent of a Subject Enterprise, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by law, against all Expenses, liabilities and amounts paid in settlement which were actually and reasonably incurred by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation, or a director, officer, employee or agent of a Subject Enterprise entitled to indemnification hereunder, and shall inure to the benefit of his or her heirs, executors and administrators.
(2) Each person who was or is a party or is threatened to be made a party to or is involved in any Proceeding brought by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was a director, officer, employee or agent of a Subject Enterprise, shall be indemnified and held harmless by the Corporation, to the fullest extent permitted by law, against all Expenses actually and reasonably incurred by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators.
(3) Notwithstanding Section 6.6(A)(1) and (2) of these Bylaws, except as otherwise provided in paragraph (C) of this Section 6.6, the Corporation shall indemnify any such person seeking indemnification in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized in the first instance by the Board of Directors.
(4) The right of any person to indemnification conferred in these Bylaws shall be a contract right and shall include the right of such person to be paid by the Corporation the Expenses incurred in defending any such Proceeding in advance of its final disposition, such advances to be paid by the Corporation within thirty days after the receipt by the Corporation of a statement or statements from the person requesting such advance or advances from time to time; provided, however, that the payment of such expenses incurred by such person in advance of the final disposition of a Proceeding shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such person to repay such amount if it is ultimately determined that he or she is not entitled to be indemnified against such Expenses by the Corporation pursuant to these Bylaws, the General Corporation Law of the State of Delaware or otherwise.
(B) To obtain indemnification under paragraph (A)(1) or (A)(2) of this Section 6.6, a claimant shall submit to the Corporation a written request, including documentation and information which is reasonably available to the claimant and is reasonably necessary to determine whether the claimant is entitled to indemnification. Upon written request by a claimant for indemnification pursuant to the first sentence of this paragraph (B), a determination, if required by applicable law, with respect to the claimants entitlement thereto shall be made as
follows: (1) if requested by the claimant, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant, or (2) if no request is made by the claimant for a determination by Independent Counsel, (i) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors, or (ii) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the claimant. The Independent Counsel shall be selected by the Board of Directors unless there shall have occurred within two years prior to the date of the commencement of the Proceeding for which indemnification is claimed a Change of Control as defined in the Corporations 2016 Long Term Incentive Plan, in which case the Independent Counsel shall be selected by the claimant unless the claimant shall request that such selection be made by the Board of Directors. Such determination of entitlement to indemnification shall be made not later than 45 days after receipt by the Corporation of a written request for indemnification. If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within 15 days after such determination.
(C) If a claim for indemnification under paragraph (A)(1) or (A)(2) of this Section 6.6 is not paid in full within 60 days after the Corporation has received a claim therefor by such claimant, or if a claim for advancement of expenses is not paid in full within 30 days after the Corporation has received a statement or statements requesting such amounts to be advanced pursuant to paragraph (A)(4) of this Section 6.6, such claimant shall thereupon (but not before) be entitled to file suit to recover the unpaid amount of such claim. Such claimant shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. The termination of any Proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself: (i) create a presumption that the claimant acted in bad faith or in a manner which he/she reasonably believed to be opposed to the best interests of the Corporation, or, with respect to any criminal Proceeding, that the claimant has reasonable cause to believe that the claimants conduct was unlawful; or (ii) otherwise adversely affect the rights of the claimant to indemnification, except as may be provided herein.
(D) If a determination shall have been made pursuant to paragraph (B) of this Section 6.6 that the claimant is entitled to indemnification, the Corporation shall be bound by such determination and shall be precluded from asserting that such determination has not been made.
(E) The Corporation shall be precluded from asserting in any judicial Proceeding commenced pursuant to paragraph (C) of this Section 6.6 that the procedures and presumptions of these Bylaws are not valid, binding and enforceable and shall stipulate in such Proceeding that the Corporation is bound by all the provisions of these Bylaws.
(F) The right to indemnification and the payment of Expenses incurred or reasonably expected to be incurred, in defending a Proceeding in advance of its final disposition conferred in these Bylaws shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or Disinterested Directors or otherwise. No repeal or modification of these Bylaws shall in any way diminish or adversely affect the rights of any director, officer, employee or agent of any Subject Enterprise hereunder in respect of any occurrence or matter arising prior to any such repeal or modification.
(G) The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of any Subject Enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. To the extent that the Corporation maintains any policy or policies providing such insurance, each such director or officer, and each such agent or employee to whom rights to indemnification have been granted as provided in paragraph (H) of this Section 6.6, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such director, officer, employee or agent.
(H) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in defending any Proceeding in advance of its final disposition, to any employee or agent of the Corporation, or to any director, officer or agent of any Subject Enterprise, to the fullest extent of the provisions of these Bylaws with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.
(I) If any provision or provisions of these Bylaws shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of these Bylaws (including, without limitation, each portion of any paragraph of these Bylaws containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of these Bylaws (including, without limitation, each such portion of any paragraph of these Bylaws containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
(J) For purposes of this Section 6.6:
(1) Disinterested Director means a director of the Corporation who is not and was not a party to the matter in respect of which indemnification is sought.
(2) Expenses means judgments, penalties (including, but not limited to, excise and similar taxes) and fines against such person and all reasonable attorneys fees, accountants fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness in any Proceeding or establishing such persons right of entitlement to indemnification for any of the foregoing.
(3) Independent Counsel means a law firm of at least 50 attorneys or a member of a law firm of at least 50 attorneys that is experienced in matters of corporate law and that neither is presently nor in the past five years has been retained to represent (i) the Corporation or the claimant or any affiliate thereof in any matter material to either such party or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term Independent
Counsel shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Corporation or the claimant in an action to determine the claimants right to indemnification under these Bylaws.
(4) Proceeding means any threatened, pending or completed action, suit, arbitration, investigation, inquiry, alternative dispute resolution mechanism, administrative or legislative hearing, or any other proceeding (including, without limitation, any securities laws action, suit, arbitration, investigation, inquiry, alternative dispute resolution mechanism, hearing or procedure) whether civil, criminal, administrative, arbitrative or investigative and whether or not based upon events occurring, or actions taken, before the date hereof, and any appeal in or related to any such action, suit, arbitration, investigation, inquiry, alternative dispute resolution mechanism, hearing or proceeding and any inquiry or investigation (including discovery), whether conducted by or in the right of the Corporation or any other person, that such person in good faith believes could lead to any such action, suit, arbitration, investigation, inquiry, alternative dispute resolution mechanism, hearing or other proceeding or appeal thereof.
(5) Subject Enterprise means the Corporation or any of the Corporations direct or indirect wholly-owned subsidiaries or any other entity, including, but not limited to, another corporation, partnership, limited liability company, employee benefit plan, joint venture, trust or other enterprise, for which a person is or was serving as a director, officer, employee, agent or fiduciary at the request of the Corporation.
(K) Any notice, request or other communication required or permitted to be given to the Corporation under this Section 6.6 shall be in writing and either delivered in person or sent by facsimile, electronic transmission, overnight courier service, or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary.
SECTION 6.7. Notices. Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the United States mail, postage paid, or by sending such notice by commercial courier service, or by facsimile or other electronic transmission (including, without limitation, by electronic mail), provided that notice to any stockholder by electronic transmission shall be given only in a manner to which the stockholder has consented, which consent has not been revoked, and in accordance with Section 232 of the General Corporation Law of the State of Delaware. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at his or her last known address as the same appears on the books of the Corporation. The time when such notice shall be deemed to have been given shall be the time such notice is received by such stockholder, director, officer, employee or agent, or by any person accepting such notice on behalf of such person, if delivered by hand, facsimile, other electronic transmission or commercial courier service, or the time such notice is deposited in the United States mail, postage prepaid, if delivered through the mail. Without limiting the manner by which notice otherwise may be given in accordance with this
Section 6.7, notice to any stockholder shall be deemed given: (1) if by facsimile, when directed to a number at which the stockholder has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (3) if by posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; (4) if by any other form of electronic transmission, when directed to the stockholder; and (5) if by mail, when deposited in the mail, postage prepaid, directed to the stockholder at such stockholders address as it appears on the records of the Corporation.
SECTION 6.8. Facsimile Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.
SECTION 6.9. Time Periods. In applying any provision of these Bylaws which requires that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.
ARTICLE VII
CONTRACTS, PROXIES, ETC.
SECTION 7.1. Contracts. Except as otherwise required by law, the Certificate of Incorporation or these Bylaws, any contracts or other instruments may be executed and delivered in the name and on behalf of the Corporation by such officer or officers of the Corporation as the Board of Directors may from time to time direct. Such authority may be general or confined to specific instances as the Board of Directors may determine. The Chief Executive Officer, the President or any Vice President may execute bonds, contracts, deeds, leases and other instruments to be made or executed for or on behalf of the Corporation. Subject to any restrictions that the Board of Directors may impose, the Chairman of the Board, the Chief Executive Officer, the President or any Vice President of the Corporation may delegate contractual powers to others under his or her authority, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.
SECTION 7.2. Proxies. Unless otherwise provided by resolution adopted by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or any Vice President may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation, limited liability company or other entity, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other entity, or to consent in writing, in the name of the Corporation as such holder, to any action by such other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name
and on behalf of the Corporation, all such written proxies or other instruments as he or she may deem necessary or proper in the premises.
ARTICLE VIII
AMENDMENTS
SECTION 8.1. Amendments. The Board of Directors shall have the power to adopt, amend or repeal these Bylaws; provided, however, that any such adoption, amendment or repeal of these Bylaws by the Board of Directors shall require the approval of a majority of the Whole Board. Notwithstanding any additional vote of the Preferred Stock or any series thereof required hereby or by any Preferred Stock Designation, these Bylaws may be adopted, altered, amended or repealed by the stockholders of the Corporation with the vote of holders of not less than 662/3% of the Voting Stock.
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (Agreement) is made by and between Extraction Oil & Gas, Inc., a Delaware corporation (the Company), XOG Services, LLC (the Employer and together with the Company, Extraction) and Mark A. Erickson (Executive) effective as of immediately prior to the effectiveness of the registration statement filed in connection with the initial public offering of the securities of the Company, which is October 11, 2016 (the Effective Date), and hereby amends and replaces in its entirety any other employment agreement heretofore entered into between Executive and the Employer or any of its affiliates.
W I T N E S S E T H:
WHEREAS, the Employer currently employs Executive as its Chief Executive Officer; and
WHEREAS, the Employer desires to continue to employ Executive on the terms and conditions, and for the consideration, hereinafter set forth and Executive desires to continue to be employed by the Employer on such terms and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, the Company, the Employer, and Executive agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined in the body of this Agreement, for purposes of this Agreement, the following capitalized words shall have the meanings indicated below:
1.1 Average Annual Bonus shall mean the average Annual Bonus paid (or payable) for the two calendar years (or if Executive was employed for less than two full calendar years such lesser number of full calendar years for which Executive was employed) preceding the Date of Termination.
1.2 Board shall mean the Board of Directors of the Company.
1.3 Cause shall mean a determination by the Board (or its delegate) that Executive (a) has engaged in gross negligence, gross incompetence or willful misconduct in the performance of Executives duties with respect to the Company or any of its affiliates, (b) has failed without proper legal reason to substantially perform Executives duties and responsibilities to the Company or any of its affiliates, (c) has materially breached any provision of this Agreement, (d) has committed an act of theft, fraud, embezzlement, misappropriation or willful breach of a fiduciary duty to the Company or any of its affiliates, or (e) has been convicted of, pleaded no contest to or received adjudicated probation or deferred adjudication in connection with a crime involving fraud, dishonesty or moral turpitude or any felony (or a crime of similar import in a foreign jurisdiction). In order to terminate Executives employment for Cause, the Board (or its delegate) must provide the Executive with a written notice providing in reasonable
detail the specific circumstances alleged to constitute Cause and the Executive must not have cured or remedied the alleged Cause event (if susceptible to cure) in the Boards (or its delegate) good faith judgment within thirty (30) days after his receipt of such notice.
1.4 Change in Control shall mean:
(a) a merger of the Company with another entity, a consolidation involving the Company, or the sale of all or substantially all of the assets of the Company to another entity if, in any such case, (i) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event or (ii) the persons who were members of the Board immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event;
(b) the dissolution or liquidation of the Company;
(c) when any person or entity, including a group as contemplated by section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the combined voting power of the outstanding securities of the Company; or
(d) as a result of or in connection with a contested election of directors, the persons who were members of the Board immediately before such election shall cease to constitute a majority of the Board.
For purposes of the preceding sentence, (i) resulting entity in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common stock of the Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, and (ii) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term Company shall refer to the resulting entity and the term Board shall refer to the board of directors (or comparable governing body) of the resulting entity.
1.5 Code shall mean the Internal Revenue Code of 1986, as amended.
1.6 Date of Termination shall mean the date Executives employment with the Employer is considered to have terminated pursuant to Section 3.5.
1.7 Good Reason shall mean the occurrence of any of the following events:
(a) a material diminution in Executives Base Salary; or
(b) a material diminution in Executives authority, duties, or responsibilities; or
(c) the involuntary relocation of the geographic location of Executives principal place of employment by more than 50 miles from the location of Executives principal place of employment as of the Effective Date; or
(d) a material breach by the Company or the Employer of this Agreement.
Notwithstanding the foregoing provisions of this Section 1.7 or any other provision in this Agreement to the contrary, any assertion by Executive of a termination of employment for Good Reason shall not be effective unless all of the following conditions are satisfied: (i) the condition described in Section 1.7(a), (b) or (c) giving rise to Executives termination of employment must have arisen without Executives consent; (ii) Executive must provide written notice to the Employer of such condition in accordance with Section 11.1 within 45 days of the later of the initial existence of the condition or when Executive first learns of the existence of the condition (provided that such notice, if provided within 45 days of when Executive first learns of the existence of the condition, must in all circumstances be provided no later than 90 days following the initial existence of the condition); (iii) the condition specified in such notice must remain uncorrected for 30 days after receipt of such notice by the Employer; and (iv) the date of Executives termination of employment must occur within 90 days after the initial existence of the condition specified in such notice or when Executive first learns of the existence of the condition (provided, however, that such termination may in no circumstance occur later than two years following the initial existence of the condition).
1.8 Notice of Termination shall mean a written notice delivered to the other party indicating the specific termination provision in this Agreement relied upon for termination of Executives employment and the intended Date of Termination and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated.
1.9 Section 409A shall mean section 409A of the Code and the Treasury Regulations and other interpretative guidance issued thereunder.
1.10 Section 409A Payment Date shall mean the earlier of (a) the date of Executives death or (b) the date that is six months after the date of termination of Executives employment with the Employer.
ARTICLE II
EMPLOYMENT AND DUTIES
2.1 Employment; Effective Date. The Employer agrees to continue to employ Executive, and Executive agrees to continue to be employed by the Employer, pursuant to the terms of this Agreement beginning as of the Effective Date and continuing for the period of time set forth in Article III of this Agreement, subject to the terms and conditions of this Agreement.
2.2 Positions. From and after the Effective Date, the Employer shall employ Executive in the position of Chief Executive Officer of the Employer and of the Company or in
such other position or positions as the parties may mutually agree, and Executive shall report to the Board.
2.3 Duties and Services. Executive agrees to serve in the position referred to in Section 2.2 and to perform diligently and to the best of Executives abilities the duties and services appertaining to such position, as well as (a) such additional reasonably specific duties and services that Executive from time to time may be reasonably directed to perform by the Employer that are reasonably consistent with such position, and (b) such additional duties and services appropriate to such position(s) which the parties mutually agree upon from time to time.
2.4 Other Interests. Executive agrees, during the period of Executives employment by the Employer, to devote substantially all of Executives business time, energy and best efforts to the business and affairs of the Company and its affiliates. Notwithstanding the foregoing, the parties acknowledge and agree that Executive may (a) engage in and manage Executives passive personal investments, (b) engage in charitable and civic activities, and (c) continue to serve as a member of the Board of Directors of each of Montana Tech Foundation and of Ultragold, LLC and as Chairman of PRE Resources, LLC; provided, however, that such activities shall be permitted so long as such activities do not materially conflict with the business and affairs of the Company or its affiliates or materially interfere with Executives performance of Executives duties hereunder.
2.5 Duty of Loyalty. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity and allegiance to act in the best interests of the Company and its affiliates and to do no act that would materially injure the business, interests, or reputation of the Company or any of its affiliates. In keeping with these duties, Executive shall make full disclosure to the Company of all business opportunities pertaining to the Companys business and shall not appropriate for Executives own benefit business opportunities concerning the subject matter of the fiduciary relationship.
ARTICLE III
TERM AND TERMINATION OF EMPLOYMENT
3.1 Term. Unless sooner terminated pursuant to other provisions hereof, the Employer agrees to continue to employ Executive for the period beginning on the Effective Date and ending on the third anniversary of the Effective Date (the Initial Expiration Date); provided, however, that beginning on the Initial Expiration Date, and on each anniversary of the Initial Expiration Date thereafter, if Executives employment under this Agreement has not been terminated pursuant to Section 3.2 or 3.3, then said term of employment shall automatically be extended for successive one-year periods unless on or before the date that is 90 days prior to the first day of any such extension period either party shall give written notice to the other that no such automatic extension shall occur, in which case the term of employment shall terminate as of the end of the current term.
3.2 Employers Right to Terminate. Notwithstanding the provisions of Section 3.1, the Employer may terminate Executives employment under this Agreement at any time for any of the following reasons by providing Executive with a Notice of Termination:
(a) upon Executive being unable to perform Executives duties or fulfill Executives obligations under this Agreement by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months as determined by the Company and certified in writing by a competent medical physician selected by the Company; or
(b) Executives death; or
(c) for Cause; or
(d) for any other reason whatsoever or for no reason at all, in the sole discretion of the Employer.
3.3 Executives Right to Terminate. Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate Executives employment under this Agreement for Good Reason or for any other reason whatsoever or for no reason at all, in the sole discretion of Executive, by providing the Employer with a Notice of Termination. In the case of a termination of employment by Executive pursuant to this Section 3.3, the Date of Termination specified in the Notice of Termination shall not be less than 15 nor more than 60 days, respectively, from the date such Notice of Termination is given, and the Employer may require a Date of Termination earlier than that specified in the Notice of Termination (and, if such earlier Date of Termination is so required, it shall not change the basis for Executives termination nor be construed or interpreted as a termination of employment pursuant to Section 3.1 or Section 3.2).
3.4 Deemed Resignations. Unless otherwise agreed to in writing by the Company or the Employer and Executive prior to the termination of Executives employment, any termination of Executives employment shall constitute (a) an automatic resignation of Executive as an officer of the Company and each affiliate of the Company and (b) an automatic resignation of Executive from the Board (if applicable), from the board of directors of any affiliate of the Company and from the board of directors or similar governing body of any corporation, limited liability entity or other entity in which the Company or any affiliate holds an equity interest and with respect to which board or similar governing body Executive serves as the Companys or such affiliates designee or other representative.
3.5 Meaning of Termination of Employment. For all purposes of this Agreement, Executive shall be considered to have terminated employment with the Employer when Executive incurs a separation from service with the Employer within the meaning of section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.
ARTICLE IV
COMPENSATION AND BENEFITS
4.1 Base Salary. During the term of this Agreement, Executive shall receive a minimum, annualized base salary of $450,000 (the Base Salary). Executives annualized base salary shall be reviewed periodically by the Board (or a committee thereof) and, in the sole discretion of the Board (or a committee thereof), such annualized base salary may be increased (but not decreased) effective as of any date determined by the Board (or a committee thereof). Executives Base Salary shall be paid in equal installments in accordance with the Employers
standard policy regarding payment of compensation to executives but no less frequently than monthly.
4.2 Bonuses. Executive shall be eligible to receive an annual, calendar-year bonus (payable in a single lump sum) based on criteria determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company (the Annual Bonus), it being understood that (a) the target bonus at planned or targeted levels of performance shall equal no less than 150% of Executives Base Salary and (b) the actual amount of each Annual Bonus shall be determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company. The Employer shall use commercially reasonable efforts to pay each Annual Bonus with respect to a calendar year on or before March 15 of the following calendar year (and in no event shall an Annual Bonus be paid after December 31 of the following calendar year); provided, however, that (except as otherwise provided in Section 5.2) Executive will be entitled to receive payment of such Annual Bonus only if Executive is employed by the Employer on such date of payment. If Executive has not been employed by the Employer since January 1 of the year that includes the Effective Date, then the Annual Bonus for such year shall be prorated based on the ratio of the number of days during such calendar year that Executive was employed by the Employer to the number of days in such calendar year.
4.3 Equity Award. Executive shall be eligible to receive an annual performance-based equity award under the Companys then existing incentive equity plan based on vesting criteria determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company, with an expected target grant date fair value equal to 150% of Executives Base Salary. The Executives entitlement to any equity award remains subject to approval by the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company.
4.4 Other Benefits. During Executives employment hereunder, Executive shall be allowed to participate in all benefit plans and programs of Extraction, including improvements or modifications of the same, which are now, or may hereafter be, available to other senior executives of the Employer or the Company. Extraction shall not, however, by reason of this Section 4.3, be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such benefit plan or program, so long as such changes are similarly applicable to other senior executives generally.
4.5 Expenses. The Employer shall reimburse Executive for all reasonable business expenses incurred by Executive in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company or the Employer; provided, in each case, that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Employer. Any such reimbursement of expenses shall be made by the Employer upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to the Employer (but in any event not later than the close of Executives taxable year following the taxable year in which the expense is incurred by Executive); provided, however, that, upon Executives termination of employment with Extraction, in no event shall any additional reimbursement be made prior to the Section 409A Payment Date to the extent such payment
delay is required under section 409A(a)(2)(B)(i) of the Code. In no event shall any reimbursement be made to Executive for such fees and expenses after the later of (a) the first anniversary of the date of Executives death or
(b) the date that is five years after the date of Executives termination of employment with the Employer (other than by reason of Executives death).
4.6 Vacation and Sick Leave. During Executives employment hereunder, Executive shall be entitled to sick and vacation leave in accordance with the Employers policies applicable to its senior executives, which leave shall accrue and be taken in accordance with the Employers sick and vacation policies in effect from time to time. Executives right to carry over unused vacation from one calendar year to the next shall be determined by the Employers vacation policy.
4.7 Offices. Subject to Articles II, III, and IV hereof, Executive agrees to serve without additional compensation, if elected or appointed thereto, as a director of the Company or any of the Companys affiliates and as a member of any committees of the board of directors of any such entities, and in one or more executive positions of any of the Companys affiliates.
ARTICLE V
EFFECT OF TERMINATION OF EMPLOYMENT ON COMPENSATION
5.1 For Cause; Without Good Reason; Certain Non-Renewals. If Executives employment hereunder shall terminate (a) at the expiration of the term provided in Section 3.1 (other than as provided under Section 5.3 below), (b) pursuant to Section 3.2(c), or (c) pursuant to Executives resignation for other than Good Reason, then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with such termination of employment, except that Executive shall be entitled to (i) payment of all accrued and unpaid Base Salary to the Date of Termination, (ii) reimbursement for all incurred but unreimbursed expenses for which Executive is entitled to reimbursement in accordance with Section 4.5, and (iii) benefits to which Executive is entitled under the terms of any applicable benefit plan or program (such amounts set forth in (i), (ii), and (iii) shall be collectively referred to herein as the Accrued Rights).
5.2 Death; Disability. If Executives employment hereunder shall terminate on account of his death or disability pursuant to Section 3.2(a) or (b), then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with such termination of employment, except that Executive (or Executives legal representative, estate, and/or beneficiaries, as the case may be) shall be entitled to receive:
(a) the Accrued Rights;
(b) a cash payment in an amount equal to one times the sum of (i) Executives Base Salary as of the Date of Termination and (ii) the Average Annual Bonus, which amount shall be paid in a lump sum cash payment on the date that is 60 days after the Date of Termination or, in the case of a termination on account of Executives death, as soon as administratively practicable following the Date of Termination but no later than December 31 of the first calendar year following the calendar year during which the death occurs; and
(c) accelerated vesting of any outstanding equity-related awards held by the Executive with respect to time-based vesting provisions (with any performance-based vesting being determined based on actual performance through the end of the performance period).
5.3 Without Cause; for Good Reason; Certain Non-Renewals. If Executives employment hereunder shall terminate at the expiration of the term provided in Section 3.1 due to a non-extension of the Agreement by the Employer, pursuant to Executives resignation for Good Reason, or by action of the Employer pursuant to Section 3.2 for any reason other than those encompassed by Section 3.2(a), 3.2(b), or 3.2(c), then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with such termination of employment, except that Executive shall be entitled to receive the Accrued Rights and, subject to Executives delivery, within 50 days after the Date of Termination, and non-revocation of an executed release in a form reasonably satisfactory to the Employer (which shall release and discharge the Company and its affiliates, subsidiaries and benefit plans, and their respective stockholders, officers, directors, members, partners, employees, agents representatives and other affiliated persons from any and all claims or causes of action of any kind or character, including but not limited to all claims or causes of action arising out of Executives employment with the Employer or its affiliates or the termination of such employment) (the Release), Executive shall receive the following additional compensation and benefits from the Company or the Employer, as applicable, (but no other additional compensation or benefits after such termination):
(a) Unpaid Prior Year Annual Bonus: The Employer shall pay to Executive any earned but unpaid Annual Bonus for the calendar year ending prior to the Date of Termination, which amount shall be payable in a lump-sum on or before the date such annual bonuses are paid to executives who have continued employment with the Employer (but in no event earlier than 60 days after the Date of Termination;
(b) Prorated Current Year Annual Bonus: The Employer shall pay to Executive a bonus for the calendar year in which the Date of Termination occurs in an amount equal to the greater of the (A) Annual Bonus for the immediately prior completed year and (B) Executives target bonus opportunity for the year including the Date of Termination, which amount shall be prorated through and including the Date of Termination (based on the ratio of the number of days Executive was employed by the Employer during such year to the number of days in such year), payable in a lump-sum on or before the date such annual bonuses are paid to executives who have continued employment with the Employer (but in no event earlier than 60 days after the Date of Termination nor later than the March 15 next following such calendar year); provided, however, that if this paragraph applies with respect to an Annual Bonus that is intended to constitute performance-based compensation within the meaning of, and for purposes of, section 162(m) of the Code, then the amount described in (A) and (B) above shall be replaced with the amount of Annual Bonus for the year including the Date of Termination, as determined in good faith by the Board in accordance with the criteria established pursuant to Section 4.2 and based on the Companys performance for such year, and this paragraph shall apply with respect to such Annual Bonus only to the extent
the applicable performance criteria have been satisfied as certified by a committee of the Board as required under section 162(m) of the Code;
(c) Severance Payment: The Employer shall pay to Executive a severance amount equal to two times the sum of (i) Executives Base Salary as of the Date of Termination and (ii) the Average Annual Bonus, which amount shall be paid in a lump sum payment on the date that is 60 days after the Date of Termination occurs; provided, however, that in the event that Executives Date of Termination under this Section 5.3(c) occurs within twelve (12) months following a Change in Control, such severance amount shall equal three times the sum of clauses (i) and (ii) of this Section 5.3(c);
(d) Post-Employment Health Coverage: During the portion, if any, of the 18-month period following the Date of Termination that Executive elects to continue coverage for Executive and Executives spouse and eligible dependents, if any, under the Companys or the Employers group health plans under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), and/or sections 601 through 608 of the Employee Retirement Income Security Act of 1974, as amended, the Employer shall promptly reimburse Executive on a monthly basis for the difference between the amount Executive pays to effect and continue such coverage and the employee contribution amount that similarly situated active senior executive employees of the Company pay for the same or similar coverage under such group health plans; provided, however, that in the event that Executive becomes eligible for group health coverage from a subsequent employer, the reimbursements provided by the Employer under this Section 5.3(d) shall immediately cease; and
(e) Equity Awards: Notwithstanding anything to the contrary included in any award agreement, 100% of outstanding equity-related awards held by the Executive shall immediately vest with respect to time-based vesting provisions (and any performance-based vesting will vest based on actual performance through the end of the performance period), and all options, stock appreciation rights, or similar awards shall remain exercisable for the full original term of the award.
ARTICLE VI
PROTECTION OF INFORMATION
6.1 Disclosure to and Property of the Company. For purposes of this Article VI, the term the Company shall include the Company and any of its affiliates, and any reference to employment or similar terms shall include a director and/or consulting relationship. All information, trade secrets, designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether patentable or not, that are conceived, made, developed, disclosed to or acquired by Executive, individually or in conjunction with others, during the period of Executives employment by the Company (whether during business hours or otherwise and whether on the Companys premises or otherwise) that relate to the Companys or any of its affiliates businesses, trade secrets, products or services (including, without limitation, all such information relating to corporate opportunities, strategies, business plans, product specifications,
compositions, manufacturing and distribution methods and processes, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customers organizations or within the organization of acquisition prospects, or production, marketing and merchandising techniques, prospective names and marks) and all writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, Confidential Information) shall be disclosed to the Company and are and shall be the sole and exclusive property of the Company or its affiliates, as applicable. Moreover, all documents, videotapes, written presentations, brochures, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, drawings, architectural renditions, models and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, Work Product) are and shall be the sole and exclusive property of the Company (or its affiliates). Executive agrees to perform all actions reasonably requested by the Company or its affiliates to establish and confirm such exclusive ownership. Upon termination of Executives employment with the Company, for any reason, Executive promptly shall deliver such Confidential Information and Work Product, and all copies thereof, to the Company.
6.2 Disclosure to Executive. The Company has and will disclose to Executive and place Executive in a position to have access to or develop Confidential Information and Work Product of the Company (or its affiliates); and has and will entrust Executive with business opportunities of the Company (or its affiliates); and has and will place Executive in a position to develop business good will on behalf of the Company (or its affiliates).
6.3 No Unauthorized Use or Disclosure.
(a) Executive agrees to preserve and protect the confidentiality of all Confidential Information and Work Product of the Company and its affiliates. Executive agrees that Executive will not, at any time during or after Executives employment with the Company, make any unauthorized disclosure of, and Executive shall not remove from the Company premises, Confidential Information or Work Product of the Company or its affiliates, or make any use thereof, except, in each case, in the carrying out of Executives responsibilities hereunder. Executive shall use all reasonable efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by Executive hereunder to preserve and protect the confidentiality of such Confidential Information.
(b) Executive shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure thereof is specifically required by law; provided, however, that in the event disclosure is required by applicable law, Executive shall provide the Company with prompt notice of such requirement prior to making any such disclosure, so that the Company may seek an appropriate protective order.
(c) At the request of the Company at any time, Executive agrees to deliver to the Company all Confidential Information that Executive may possess or control.
Executive agrees that all Confidential Information of the Company (whether now or hereafter existing) conceived, discovered or made by Executive during the period of Executives employment by the Company exclusively belongs to the Company (and not to Executive), and upon request by the Company for specified Confidential Information, Executive will promptly disclose such Confidential Information to the Company and perform all actions reasonably requested by the Company to establish and confirm such exclusive ownership. Affiliates of the Company shall be third party beneficiaries of Executives obligations under this Article VI. As a result of Executives employment by the Company, Executive may also from time to time have access to, or knowledge of, Confidential Information or Work Product of third parties, such as customers, suppliers, partners, joint venturers, and the like, of the Company and its affiliates. Executive also agrees to preserve and protect the confidentiality of such third party Confidential Information and Work Product.
(d) Nothing herein will prevent Executive from: (i) making a good faith report of possible violations of applicable law to any governmental agency or entity; or (ii) making disclosures that are protected under the whistleblower provisions of applicable law. For the avoidance of doubt, nothing herein shall prevent Executive from making a disclosure of a trade secret that: (A) is made in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, an individual who files a lawsuit for retaliation by an employer of reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (X) files any document containing the trade secret under seal; and (Y) does not disclose the trade secret, except pursuant to court order.
6.4 Ownership by the Company. If, during Executives employment by the Company, Executive creates any work of authorship fixed in any tangible medium of expression that is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to the Companys business, products, or services, whether such work is created solely by Executive or jointly with others (whether during business hours or otherwise and whether on the Companys premises or otherwise), including any Work Product, the Company shall be deemed the author of such work if the work is prepared by Executive in the scope of Executives employment; or, if the work relating to the Companys business, products, or services is not prepared by Executive within the scope of Executives employment but is specially ordered by the Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and the Company shall be the author of the work. If the work relating to the Companys business, products, or services is neither prepared by Executive within the scope of Executives employment nor a work specially ordered that is deemed to be a work made for hire during Executives employment by the Company, then Executive hereby agrees to assign, and by these presents does assign, to the Company all of Executives worldwide right, title, and interest in and to such work and all rights of copyright therein.
6.5 Assistance by Executive. During the period of Executives employment by the Company, Executive shall assist the Company and its nominee, at any time, in the protection of the Companys or its affiliates worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee(s) and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries. For the period of two (2) years after Executives employment termination with the Company pursuant to Section 5.3 above, at the request from time to time and expense of the Company or its affiliates, Executive shall assist the Company or its nominee(s) in the protection of the Companys or its affiliates worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries. Executive shall assist after Executives employment termination with the Company other than pursuant to Section 5.3 above pursuant to mutually agreeable terms between the Executive and the Company.
6.6 Remedies. Executive acknowledges that money damages would not be a sufficient remedy for any breach of this Article VI by Executive, and the Company or its affiliates shall be entitled to enforce the provisions of this Article VI by terminating payments or benefits then owing to Executive under Section 5.3and to specific performance and injunctive relief as remedies for such breach or any threatened breach; provided, that, to the extent the Company receives monetary damages from the Executive, such amounts shall not exceed the total value Executive received under Section 5.3. Such remedies shall not be deemed the exclusive remedies for a breach of this Article VI but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Executive and Executives agents. However, if it is determined that Executive has not committed a breach of this Article VI, then the Company shall resume the payments and benefits due under this Agreement and pay to Executive and Executives spouse, if applicable, all payments and benefits that had been suspended pending such determination.
ARTICLE VII
STATEMENTS CONCERNING THE COMPANY
7.1 Statements Concerning the Company. Executive shall refrain, both during and after the termination of the employment relationship, from publishing any oral or written statements about the Company, any of its affiliates or any of the Companys or such affiliates directors, officers, employees, consultants, agents or representatives that (a) are slanderous, libelous or defamatory, (b) disclose Confidential Information of the Company, any of its affiliates or any of the Companys or any such affiliates business affairs, directors, officers, employees, consultants, agents or representatives, or (c) place the Company, any of its affiliates, or any of the Companys or any such affiliates directors, officers, employees, consultants, agents or representatives in a false light before the public. The Company agrees that the members of the Board and the Companys named executive officers, while serving in such capacity for the Company, shall not make negative comments about the Executive or otherwise disparage the Executive in any manner that is likely to be harmful to the Executives business reputation. The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without
limitation, depositions in connection with such proceedings), and the foregoing limitation on the Companys executives and directors shall not be violated by statements that they in good faith believe are necessary or appropriate to make in connection with performing their duties and obligations to the Company. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded the Company and its affiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law.
7.2 Enforcement Rights. A violation or threatened violation of this Article VII may be enjoined by the courts. The rights afforded the Company and its affiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law.
ARTICLE VIII
NON-COMPETITION AGREEMENT
8.1 Definitions. As used in this Article VIII, the following terms shall have the following meanings:
Business means (a) during the period of Executives employment by the Company, the core products and services provided by the Company and its affiliates during such period and other products and services that are functionally equivalent to the foregoing, and (b) during the portion of the Prohibited Period that begins on the termination of Executives employment with the Employer, the products and services provided by the Company and its affiliates at the time of such termination of employment and other products and services that are functionally equivalent to the foregoing.
Competing Business means any business, individual, partnership, firm, corporation or other entity which wholly or in any significant part engages in any business competing with the Business in the Restricted Area. In no event will the Company or any of its affiliates be deemed a Competing Business.
Governmental Authority means any governmental, quasi-governmental, state, county, city or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof.
Legal Requirement means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization, or other directional requirement (including, without limitation, any of the foregoing that relates to environmental standards or controls, energy regulations and occupational, safety and health standards or controls including those arising under environmental laws) of any Governmental Authority.
Prohibited Period means the period during which Executive is employed by the Employer hereunder and a period of two years following the termination of Executives employment with the Employer.
Restricted Area means any geographic area within a 100-mile radius of any location where the Company or its affiliates engages in the Business, and for which Executive has or had responsibilities, during the period of Executives employment.
8.2 Non-Competition; Non-Solicitation. Executive and Extractionagree to the non-competition and non-solicitation provisions of this Article VIII in consideration for the Confidential Information provided by Extractoin to Executive pursuant to Article VI of this Agreement, to protect the trade secrets and confidential information of the Company or its affiliates disclosed or entrusted to Executive by the Company or its affiliates or created or developed by Executive for the Company or its affiliates, to protect the business goodwill of the Company or its affiliates developed through the efforts of Executive and/or the business opportunities disclosed or entrusted to Executive by the Company or its affiliates and as an additional incentive for Extraction to enter into this Agreement.
(a) Subject to the exceptions set forth in Section 8.2(b) below, Executive expressly covenants and agrees that during the Prohibited Period (i) Executive will refrain from carrying on or engaging in, directly or indirectly, any Competing Business in the Restricted Area and (ii) Executive will not, and Executive will cause Executives affiliates not to, directly or indirectly, own, manage, operate, join, become an employee of, partner in, owner or member of (or an independent contractor to), control or participate in, be connected with or loan money to, sell or lease equipment or property to, or otherwise be affiliated with any business, individual, partnership, firm, corporation or other entity which engages in a Competing Business in the Restricted Area.
(b) Notwithstanding the restrictions contained in Section 8.2(a), Executive or any of Executives affiliates may own an aggregate of not more than 2% of the outstanding stock of any class of any corporation engaged in a Competing Business, if such stock is listed on a national securities exchange or regularly traded in the over-the-counter market by a member of a national securities exchange, without violating the provisions of Section 8.2(a), provided that neither Executive nor any of Executives affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation.
(c) Executive further expressly covenants and agrees that during the Prohibited Period, Executive will not, and Executive will cause Executives affiliates not to (i) engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of the Company or any of its affiliates or (ii) canvass, solicit, approach or entice away or cause to be canvassed, solicited, approached or enticed away from the Company or any of its affiliates any person who or which is a customer of any of such entities during the period during which Executive is employed by the Employer.
(d) The restrictions contained in Section 8.2 shall not apply to any product or service that the Company or the Employer provided during Executives employment but that the Company or the Employer no longer provides at the Date of Termination.
(e) Before accepting employment with any other person or entity while employed by the Employer during the Prohibited Period, the Executive will inform such person or entity of the restrictions contained in this Article VIII.
8.3 Relief. Executive and Extraction agree and acknowledge that the limitations as to time, geographical area and scope of activity to be restrained as set forth in Section 8.2 are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of Extraction. Executive and Extraction also acknowledge that money damages would not be sufficient remedy for any breach of this Article VIII by Executive, and the Company or its affiliates shall be entitled to enforce the provisions of this Article VIII by terminating payments or benefits then owing to Executive under Section 5.3 and to specific performance and injunctive relief as remedies for such breach or any threatened breach; provided, that, to the extent the Company or the Employer receives monetary damages from the Executive, such amounts shall not exceed the total value Executive received under Section 5.3. Such remedies shall not be deemed the exclusive remedies for a breach of this Article VIII but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Executive and Executives agents. However, if it is determined that Executive has not committed a breach of this Article VIII, then Extraction shall resume the payments and benefits due under this Agreement and pay to Executive all payments and benefits that had been suspended pending such determination.
8.4 Reasonableness; Enforcement. Executive hereby represents to Extraction that Executive has read and understands, and agrees to be bound by, the terms of this Article VIII. Executive acknowledges that the geographic scope and duration of the covenants contained in this Article VIII are the result of arms-length bargaining and are fair and reasonable in light of (a) the nature and wide geographic scope of the operations of the Business, (b) Executives level of control over and contact with the Business in all jurisdictions in which it is conducted, (c) the fact that the Business is conducted throughout the Restricted Area and (d)the amount of Confidential Information that Executive is receiving in connection with the performance of Executives duties hereunder. It is the desire and intent of the parties that the provisions of this Article VIII be enforced to the fullest extent permitted under applicable Legal Requirements, whether now or hereafter in effect and therefore, to the extent permitted by applicable Legal Requirements, Executive and Extraction hereby waive any provision of applicable Legal Requirements that would render any provision of this Article VIII invalid or unenforceable.
8.5 Reformation. Extraction and Executive agree that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Article VIII would cause irreparable injury to Extraction. Executive understands that the foregoing restrictions may limit Executives ability to engage in certain businesses anywhere in the Restricted Area during the Prohibited Period, but acknowledges that Executive will receive sufficient consideration from Extraction to justify such restriction. Further, Executive acknowledges that Executives skills are such that Executive can be gainfully employed in non-competitive employment, and that the agreement not to compete will not prevent Executive from earning a living. Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced. By agreeing to this contractual modification prospectively at this time, Extraction and Executive intend to make this provision enforceable under the law or laws of all applicable States, Provinces and other jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not
be rendered void or illegal. Such modification shall not affect the payments made to Executive under this Agreement.
ARTICLE IX
DISPUTE RESOLUTION
9.1 Arbitration. Except as otherwise provided in this Article IX, any and all claims or disputes between Executive and the Company or its parents, subsidiaries and affiliates (including, without limitation, the validity, scope, and enforceability of this Article IX and claims arising under any federal, state or local law prohibiting discrimination in employment or governing the employment relationship in any way) shall be submitted for final and binding arbitration by a single arbitrator in Denver, Colorado, in accordance with the rules for resolution of employment disputes of the American Arbitration Association (AAA). The arbitrator shall have the power to gather such materials, information, testimony, and evidence as he or she deems relevant to the dispute before him or her, and each party will provide such materials, information, testimony, and evidence requested by the arbitrator, except to the extent any information so requested is subject to an attorney-client or other privilege. The arbitrator shall apply the substantive law of the State of Colorado (excluding Colorado choice-of-law principles that might call for the application of some other states law), or federal law, or both as applicable to the claims asserted. The results of the arbitration and the decision of the arbitrator will be final and binding on the parties and each party agrees and acknowledges that these results shall be enforceable in a court of law of competent jurisdiction; provided that the parties agree that the arbitrator and any court enforcing the award of the arbitrator shall not have the right or authority to award punitive or exemplary damages to any disputing party. No demand for arbitration may be made after the date when the institution of legal or equitable proceedings based on such claim or dispute would be barred by the applicable statute of limitations. In the event either party must resort to the judicial process to enforce the provisions of this Agreement, the award of an arbitrator, or equitable relief granted by an arbitrator, the party seeking enforcement shall be entitled to recover from the other party all costs of litigation including, but not limited to, reasonable attorneys fees and court costs. All proceedings conducted pursuant to this agreement to arbitrate, including any order, decision or award of the arbitrator, shall be kept confidential by all parties. Executive and Extraction explicitly recognize that no provision of this Article IX shall prevent either party from seeking to resolve any dispute relating to Article VI or Article VIII of this Agreement in a court of law. Executive and Extraction further acknowledge and agree that a court of competent jurisdiction shall have the power to maintain the status quo pending the arbitration of any dispute under this Article IX, and this Article IX shall not require the arbitration of an application for emergency or temporary injunctive relief by either party pending arbitration; provided, however, that the remainder of any such dispute beyond the application for emergency or temporary injunctive relief shall be subject to arbitration under this Article IX. EXECUTIVE ACKNOWLEDGES THAT, BY SIGNING THIS AGREEMENT, EXECUTIVE IS WAIVING ANY RIGHT THAT EXECUTIVE MAY HAVE TO A JURY TRIAL OR, EXCEPT AS EXPRESSLY PROVIDED HEREIN, A COURT TRIAL OF ANY CLAIM ALLEGED BY EXECUTIVE.
ARTICLE X
CERTAIN EXCISE TAXES
Notwithstanding anything to the contrary in this Agreement, if Executive is a disqualified individual (as defined in section 280G(c) of the Code), and the payments and benefits provided for in this Agreement, together with any other payments and benefits which Executive has the right to receive from the Company or any of its affiliates, would constitute a parachute payment (as defined in section 280G(b)(2) of the Code), then the payments and benefits provided for in this Agreement shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive from the Company and its affiliates will be one dollar ($1.00) less than three times Executives base amount (as defined in section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Executive shall be subject to the excise tax imposed by section 4999 of the Code, or (b) paid in full, whichever produces the better net after-tax position to Executive (taking into account any applicable excise tax under section 4999 of the Code and any other applicable taxes, including any federal, state, municipal, and local income or employment taxes, and taking into account the phase out of itemized deductions and personal exemptions). The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then, reducing any benefit to be provided in-kind hereunder in a similar order, in all instances in accordance with Section 409A. The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by the Company or the Employer in good faith; provided, however, that (a) no portion of Executives payments or benefits the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a payment within the meaning of section 280G(b) of the Code will be taken into account; (b) no portion of Executives payments or benefits will be taken into account which, in the opinion of tax counsel (Tax Counsel) for the Company does not constitute a parachute payment (including by reason of section 280G(b)(4)(A) of the Code); (c) in calculating the applicable excise tax under section 4999 of the Code, no portion of Executives payments or benefits will be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of the base amount that is allocable to such reasonable compensation; and (d) the value of any non-cash benefit or any deferred payment or benefit will be determined by Tax Counsel or the Companys independent auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. At the time that payments are made under this Agreement, the Company will provide Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations, including any opinions or other advice the Company received from Tax Counsel, the Companys independent auditor, or other advisors or consultants (and any such opinions or advice which are in writing will be attached to the statement). If a reduced payment or benefit is made or provided, and through error or otherwise, that payment or benefit, when aggregated with other payments and benefits from the Company (or its affiliates) used in determining if a parachute payment exists, exceeds one dollar ($1.00) less than three times Executives base amount, then Executive shall immediately repay such excess to the Company or the applicable affiliate upon notification that an overpayment has been made. The fact that Executives right to
payments or benefits may be reduced by reason of the limitations contained in this Article X will not limit or otherwise affect any other rights of Executive under this Agreement or otherwise. All determinations required by this Article X will be made at the expense of the Company. However, nothing in this Article X shall require the Company or any affiliate to be responsible for, or have any liability or obligation with respect to, Executives excise tax liabilities under section 4999 of the Code.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (a) when received if delivered personally or by courier, (b) on the date receipt is acknowledged if delivered by certified mail, postage prepaid, return receipt requested or (c) one day after transmission if sent by facsimile transmission with confirmation of transmission, as follows:
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Mark A. Erickson | |
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Extraction Oil & Gas, Inc. | |
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370 17th Street, Suite 5300 | |
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Extraction Oil & Gas, Inc. | |
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or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.
11.2 Applicable Law; Submission to Jurisdiction.
(a) This Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of Colorado, without regard to conflicts of laws principles thereof.
(b) With respect to any claim or dispute related to or arising under this Agreement, the parties hereto hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in the State of Colorado.
11.3 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this
Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
11.4 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.
11.5 Counterparts. 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 Agreement.
11.6 Withholding of Taxes and Other Employee Deductions. The Employer or the Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes and withholdings as may be required pursuant to any law or governmental regulation or ruling and all other customary deductions made with respect to the Companys employees generally.
11.7 Headings. The Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.
11.8 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.
11.9 Affiliate. As used in this Agreement, the term affiliate as used with respect to a particular person or entity shall mean any other person or entity which owns or controls, is owned or controlled by, or is under common ownership or control with, such particular person or entity.
11.10 Successors; Assigns; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Company and the Employer and any successor of the Company or the Employer. In addition, the Employer may assign this Agreement and Executives employment to any other affiliate of the Company at any time without the consent of Executive, and any assign of the Employer shall be deemed to be the Employer for purposes of this Agreement. Except as provided in the foregoing sentences of this Section 11.10, this Agreement and the rights and obligations of the parties hereunder are personal, and neither this Agreement nor any right, benefit, or obligation of either party hereto shall be subject to voluntary or involuntary assignment, alienation, or transfer, whether by operation of law or otherwise, without the prior written consent of the other party. In addition, any payment owed to Executive hereunder after the date of Executives death shall be paid to Executives estate. Each affiliate of the Company shall be a third party beneficiary of, and may directly enforce, Executives obligations under Article VI, Article VII and Article VIII.
11.11 Term. Termination of this Agreement shall not affect any right or obligation of any party which is accrued or vested prior to such termination. Without limiting the scope of the preceding sentence, the provisions of Articles V, VI, VII, VIII and IX shall survive any termination of the employment relationship and/or of this Agreement.
11.12 Entire Agreement. Except as provided in any signed written agreement contemporaneously or hereafter executed by the Company or the Employer and Executive, this Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by the Employer. Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution of this Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect.
11.13 Modification; Waiver. Any modification to or waiver of this Agreement will be effective only if it is in writing and signed by the parties to this Agreement.
11.14 Actions by the Board. Any and all determinations or other actions required of the Board hereunder that relate specifically to Executives employment by the Employer or the terms and conditions of such employment shall be made by the members of the Board other than Executive if Executive is a member of the Board, and Executive shall not have any right to vote or decide upon any such matter.
11.15 Executives Representations and Warranties. Executive represents and warrants to Extraction that (a) Executive does not have any agreements with any prior employers or other third parties that will prohibit Executive from working for Extraction or fulfilling Executives duties and obligations to Extraction pursuant to this Agreement and (b) Executive has complied with all duties imposed on Executive with respect to Executives former employer, e.g., Executive does not possess any tangible property belonging to Executives former employer.
11.16 Section 409A. The parties hereby agree that this Agreement is intended to satisfy the requirements of Section 409A with respect to amounts, if any, subject thereto and shall be interpreted, construed, and administered consistent with such intent. Each payment made under this Agreement shall be deemed to be a separate payment for purposes of Section 409A. Notwithstanding any provision in this Agreement to the contrary, if Executive is a specified employee (as such term is defined in Section 409A and as determined by the Employer in accordance with any method permitted under Section 409A) and any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if Executives receipt of such payment or benefit is not delayed until the Section 409A Payment Date, then such payment or benefit shall not be provided to Executive (or Executives estate, if applicable) until the Section 409A Payment Date. Notwithstanding anything to the contrary in this Agreement or elsewhere, any payment or benefit under this Agreement or otherwise that is exempt from Section 409A pursuant to Treasury Regulation § 1.409A-l(b)(9)(v)(A) or (C) (relating to certain reimbursements and in-kind benefits) shall be paid or provided only to the extent that the expenses are not incurred, or the benefits are not provided, beyond the last day of the second calendar year following the calendar year in which Executives separation from service occurs; and provided further that such expenses are reimbursed no later than the last day of the third calendar year following the calendar year in which Executives separation from service occurs. To the extent any expense reimbursement or the provision of any in-kind benefit is determined to be subject to Section 409A (and not exempt pursuant to the prior sentence or otherwise) (i) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit, (ii) the amount of any such expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (iii) such payments shall be made on or before the last day of Executives taxable year following the taxable year in which the expense occurred.
11.17 Clawback. Notwithstanding any provisions in this Agreement to the contrary, any compensation, payments, or benefits provided hereunder, whether in the form of cash or otherwise, shall be subject to a clawback to the extent necessary to comply with the requirements of any applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, section 304 of the Sarbanes Oxley Act of 2002, or any regulations promulgated thereunder, or any policy adopted by the Company pursuant to any such law (whether in existence as of the Effective Date or later adopted).
[Signatures begin on next page.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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EXTRACTION OIL & GAS, INC. | ||
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/s/ Matthew R. Owens | |
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Name: |
Matthew R. Owens |
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President |
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XOG SERVICES, LLC | ||
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Name: |
Matthew R. Owens |
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President |
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MARK A. ERICKSON | ||
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/s/ Mark A. Erickson |
SIGNATURE PAGE TO
EMPLOYMENT AGREEMENT
MARK A. ERICKSON
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (Agreement) is made by and between Extraction Oil & Gas, Inc., a Delaware corporation (the Company), XOG Services, LLC (the Employer and together with the Company, Extraction) and Matthew R. Owens (Executive) effective as of immediately prior to the effectiveness of the registration statement filed in connection with the initial public offering of the securities of the Company, which is October 11, 2016 (the Effective Date), and hereby amends and replaces in its entirety any other employment agreement heretofore entered into between Executive and the Employer or any of its affiliates.
W I T N E S S E T H:
WHEREAS, the Employer currently employs Executive as its President; and
WHEREAS, the Employer desires to continue to employ Executive on the terms and conditions, and for the consideration, hereinafter set forth and Executive desires to continue to be employed by the Employer on such terms and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, the Company, the Employer, and Executive agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined in the body of this Agreement, for purposes of this Agreement, the following capitalized words shall have the meanings indicated below:
1.1 Average Annual Bonus shall mean the average Annual Bonus paid (or payable) for the two calendar years (or if Executive was employed for less than two full calendar years such lesser number of full calendar years for which Executive was employed) preceding the Date of Termination.
1.2 Board shall mean the Board of Directors of the Company.
1.3 Cause shall mean a determination by the Employer that Executive (a) has engaged in gross negligence, gross incompetence or willful misconduct in the performance of Executives duties with respect to the Company or any of its affiliates, (b) has failed without proper legal reason to substantially perform Executives duties and responsibilities to the Company or any of its affiliates, (c) has materially breached any provision of this Agreement, (d) has committed an act of theft, fraud, embezzlement, misappropriation or willful breach of a fiduciary duty to the Company or any of its affiliates, or (e) has been convicted of, pleaded no contest to or received adjudicated probation or deferred adjudication in connection with a crime involving fraud, dishonesty or moral turpitude or any felony (or a crime of similar import in a foreign jurisdiction). In order to terminate Executives employment for Cause, the Employer must provide the Executive with a written notice providing in reasonable detail the specific circumstances alleged to constitute Cause and the Executive must not have cured or remedied the
alleged Cause event (if susceptible to cure) in the Employers good faith judgment within thirty (30) days after his receipt of such notice.
1.4 Change in Control shall mean:
(a) a merger of the Company with another entity, a consolidation involving the Company, or the sale of all or substantially all of the assets of the Company to another entity if, in any such case, (i) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event or (ii) the persons who were members of the Board immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event;
(b) the dissolution or liquidation of the Company;
(c) when any person or entity, including a group as contemplated by section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the combined voting power of the outstanding securities of the Company; or
(d) as a result of or in connection with a contested election of directors, the persons who were members of the Board immediately before such election shall cease to constitute a majority of the Board.
For purposes of the preceding sentence, (i) resulting entity in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common stock of the Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, and (ii) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term Company shall refer to the resulting entity and the term Board shall refer to the board of directors (or comparable governing body) of the resulting entity.
1.5 Code shall mean the Internal Revenue Code of 1986, as amended.
1.6 Date of Termination shall mean the date Executives employment with the Employer is considered to have terminated pursuant to Section 3.5.
1.7 Good Reason shall mean the occurrence of any of the following events:
(a) a material diminution in Executives Base Salary; or
(b) a material diminution in Executives authority, duties, or responsibilities; or
(c) the involuntary relocation of the geographic location of Executives principal place of employment by more than 50 miles from the location of Executives principal place of employment as of the Effective Date; or
(d) a material breach by the Company or the Employer of this Agreement.
Notwithstanding the foregoing provisions of this Section 1.7 or any other provision in this Agreement to the contrary, any assertion by Executive of a termination of employment for Good Reason shall not be effective unless all of the following conditions are satisfied: (i) the condition described in Section 1.7(a), (b) or (c) giving rise to Executives termination of employment must have arisen without Executives consent; (ii) Executive must provide written notice to the Employer of such condition in accordance with Section 11.1 within 45 days of the later of the initial existence of the condition or when Executive first learns of the existence of the condition (provided that such notice, if provided within 45 days of when Executive first learns of the existence of the condition, must in all circumstances be provided no later than 90 days following the initial existence of the condition); (iii) the condition specified in such notice must remain uncorrected for 30 days after receipt of such notice by the Employer; and (iv) the date of Executives termination of employment must occur within 90 days after the initial existence of the condition specified in such notice or when Executive first learns of the existence of the condition (provided, however, that such termination may in no circumstance occur later than two years following the initial existence of the condition).
1.8 Notice of Termination shall mean a written notice delivered to the other party indicating the specific termination provision in this Agreement relied upon for termination of Executives employment and the intended Date of Termination and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated.
1.9 Section 409A shall mean section 409A of the Code and the Treasury Regulations and other interpretative guidance issued thereunder.
1.10 Section 409A Payment Date shall mean the earlier of (a) the date of Executives death or (b) the date that is six months after the date of termination of Executives employment with the Employer.
ARTICLE II
EMPLOYMENT AND DUTIES
2.1 Employment; Effective Date. The Employer agrees to continue to employ Executive, and Executive agrees to continue to be employed by the Employer, pursuant to the terms of this Agreement beginning as of the Effective Date and continuing for the period of time set forth in Article III of this Agreement, subject to the terms and conditions of this Agreement.
2.2 Positions. From and after the Effective Date, the Employer shall employ Executive in the position of President of the Employer and of the Company or in such
other position or positions as the parties may mutually agree, and Executive shall report to the Chief Executive Officer of the Company.
2.3 Duties and Services. Executive agrees to serve in the position referred to in Section 2.2 and to perform diligently and to the best of Executives abilities the duties and services appertaining to such position, as well as (a) such additional reasonably specific duties and services that Executive from time to time may be reasonably directed to perform by the Employer that are reasonably consistent with such position, and (b) such additional duties and services appropriate to such position(s) which the parties mutually agree upon from time to time.
2.4 Other Interests. Executive agrees, during the period of Executives employment by the Employer, to devote substantially all of Executives business time, energy and best efforts to the business and affairs of the Company and its affiliates. Notwithstanding the foregoing, the parties acknowledge and agree that Executive may (a) engage in and manage Executives passive personal investments and (b) engage in charitable and civic activities, including service as a member of the Board of Directors of the Colorado Oil & Gas Association and in an advisory capacity to the Denver Metro Chamber of Commerce; provided, however, that such activities shall be permitted so long as such activities do not materially conflict with the business and affairs of the Company or its affiliates or materially interfere with Executives performance of Executives duties hereunder.
2.5 Duty of Loyalty. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity and allegiance to act in the best interests of the Company and its affiliates and to do no act that would materially injure the business, interests, or reputation of the Company or any of its affiliates. In keeping with these duties, Executive shall make full disclosure to the Company of all business opportunities pertaining to the Companys business and shall not appropriate for Executives own benefit business opportunities concerning the subject matter of the fiduciary relationship.
ARTICLE III
TERM AND TERMINATION OF EMPLOYMENT
3.1 Term. Unless sooner terminated pursuant to other provisions hereof, the Employer agrees to continue to employ Executive for the period beginning on the Effective Date and ending on the third anniversary of the Effective Date (the Initial Expiration Date); provided, however, that beginning on the Initial Expiration Date, and on each anniversary of the Initial Expiration Date thereafter, if Executives employment under this Agreement has not been terminated pursuant to Section 3.2 or 3.3, then said term of employment shall automatically be extended for successive one-year periods unless on or before the date that is 90 days prior to the first day of any such extension period either party shall give written notice to the other that no such automatic extension shall occur, in which case the term of employment shall terminate as of the end of the current term.
3.2 Employers Right to Terminate. Notwithstanding the provisions of Section 3.1, the Employer may terminate Executives employment under this Agreement at any time for any of the following reasons by providing Executive with a Notice of Termination:
(a) upon Executive being unable to perform Executives duties or fulfill Executives obligations under this Agreement by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than [ ] months as determined by the Company and certified in writing by a competent medical physician selected by the Company; or
(b) Executives death; or
(c) for Cause; or
(d) for any other reason whatsoever or for no reason at all, in the sole discretion of the Employer.
3.3 Executives Right to Terminate. Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate Executives employment under this Agreement for Good Reason or for any other reason whatsoever or for no reason at all, in the sole discretion of Executive, by providing the Employer with a Notice of Termination. In the case of a termination of employment by Executive pursuant to this Section 3.3, the Date of Termination specified in the Notice of Termination shall not be less than 15 nor more than 60 days, respectively, from the date such Notice of Termination is given, and the Employer may require a Date of Termination earlier than that specified in the Notice of Termination (and, if such earlier Date of Termination is so required, it shall not change the basis for Executives termination nor be construed or interpreted as a termination of employment pursuant to Section 3.1 or Section 3.2).
3.4 Deemed Resignations. Unless otherwise agreed to in writing by the Company or the Employer and Executive prior to the termination of Executives employment, any termination of Executives employment shall constitute (a) an automatic resignation of Executive as an officer of the Company and each affiliate of the Company and (b) an automatic resignation of Executive from the Board (if applicable), from the board of directors of any affiliate of the Company and from the board of directors or similar governing body of any corporation, limited liability entity or other entity in which the Company or any affiliate holds an equity interest and with respect to which board or similar governing body Executive serves as the Companys or such affiliates designee or other representative.
3.5 Meaning of Termination of Employment. For all purposes of this Agreement, Executive shall be considered to have terminated employment with the Employer when Executive incurs a separation from service with the Employer within the meaning of section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.
ARTICLE IV
COMPENSATION AND BENEFITS
4.1 Base Salary. During the term of this Agreement, Executive shall receive a minimum, annualized base salary of $450,000 (the Base Salary). Executives annualized base salary shall be reviewed periodically by the Board (or a committee thereof) and, in the sole discretion of the Board (or a committee thereof), such annualized base salary may be increased (but not decreased) effective as of any date determined by the Board (or a committee thereof).
Executives Base Salary shall be paid in equal installments in accordance with the Employers standard policy regarding payment of compensation to executives but no less frequently than monthly.
4.2 Bonuses. Executive shall be eligible to receive an annual, calendar-year bonus (payable in a single lump sum) based on criteria determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company (the Annual Bonus), it being understood that (a) the target bonus at planned or targeted levels of performance shall equal no less than 100% of Executives Base Salary and (b) the actual amount of each Annual Bonus shall be determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company. The Employer shall use commercially reasonable efforts to pay each Annual Bonus with respect to a calendar year on or before March 15 of the following calendar year (and in no event shall an Annual Bonus be paid after December 31 of the following calendar year); provided, however, that (except as otherwise provided in Section 5.3) Executive will be entitled to receive payment of such Annual Bonus only if Executive is employed by the Employer on such date of payment. If Executive has not been employed by the Employer since January 1 of the year that includes the Effective Date, then the Annual Bonus for such year shall be prorated based on the ratio of the number of days during such calendar year that Executive was employed by the Employer to the number of days in such calendar year.
4.3 Equity Award. Executive shall be eligible to receive an annual performance-based equity award under the Companys then existing incentive equity plan based on vesting criteria determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company, with an expected target grant date fair value equal to 100% of Executives Base Salary. The Executives entitlement to any equity award remains subject to approval by the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company.
4.4 Other Benefits. During Executives employment hereunder, Executive shall be allowed to participate in all benefit plans and programs of Extraction, including improvements or modifications of the same, which are now, or may hereafter be, available to other senior executives of the Employer or the Company. Extraction shall not, however, by reason of this Section 4.3, be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such benefit plan or program, so long as such changes are similarly applicable to other senior executives generally.
4.5 Expenses. The Employer shall reimburse Executive for all reasonable business expenses incurred by Executive in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company or the Employer; provided, in each case, that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Employer. Any such reimbursement of expenses shall be made by the Employer upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to the Employer (but in any event not later than the close of Executives taxable year following the taxable year in which the expense is incurred by Executive); provided, however, that, upon Executives termination of employment with Extraction, in no event shall any additional
reimbursement be made prior to the Section 409A Payment Date to the extent such payment delay is required under section 409A(a)(2)(B)(i) of the Code. In no event shall any reimbursement be made to Executive for such fees and expenses after the later of (a) the first anniversary of the date of Executives death or (b) the date that is five years after the date of Executives termination of employment with the Employer (other than by reason of Executives death).
4.6 Vacation and Sick Leave. During Executives employment hereunder, Executive shall be entitled to sick and vacation leave in accordance with the Employers policies applicable to its senior executives, which leave shall accrue and be taken in accordance with the Employers sick and vacation policies in effect from time to time. Executives right to carry over unused vacation from one calendar year to the next shall be determined by the Employers vacation policy.
4.7 Offices. Subject to Articles II, III, and IV hereof, Executive agrees to serve without additional compensation, if elected or appointed thereto, as a director of the Company or any of the Companys affiliates and as a member of any committees of the board of directors of any such entities, and in one or more executive positions of any of the Companys affiliates.
ARTICLE V
EFFECT OF TERMINATION OF EMPLOYMENT ON COMPENSATION
5.1 For Cause; Without Good Reason; Certain Non-Renewals. If Executives employment hereunder shall terminate (a) at the expiration of the term provided in Section 3.1 (other than as provided under Section 5.3 below), (b) pursuant to Section 3.2(c), or (c) pursuant to Executives resignation for other than Good Reason, then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with such termination of employment, except that Executive shall be entitled to (i) payment of all accrued and unpaid Base Salary to the Date of Termination, (ii) reimbursement for all incurred but unreimbursed expenses for which Executive is entitled to reimbursement in accordance with Section 4.4, and (iii) benefits to which Executive is entitled under the terms of any applicable benefit plan or program (such amounts set forth in (i), (ii), and (iii) shall be collectively referred to herein as the Accrued Rights).
5.2 Death; Disability. If Executives employment hereunder shall terminate on account of his death or disability pursuant to Section 3.2(a) or (b), then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with such termination of employment, except that Executive (or Executives legal representative, estate, and/or beneficiaries, as the case may be) shall be entitled to receive:
(a) the Accrued Rights;
(b) a cash payment in an amount equal to one times the sum of (i) Executives Base Salary as of the Date of Termination and (ii) the Average Annual Bonus, which amount shall be paid in a lump sum cash payment on the date that is 60 days after the Date of Termination or, in the case of a termination on account of Executives death, as soon as administratively practicable following the Date of Termination but no later than
December 31 of the first calendar year following the calendar year during which the death occurs; and
(c) accelerated vesting of any outstanding equity-related awards held by the Executive with respect to time-based vesting provisions (with any performance-based vesting being determined based on actual performance through the end of the performance period).
5.3 Without Cause; for Good Reason; Certain Non-Renewals. If Executives employment hereunder shall terminate at the expiration of the term provided in Section 3.1 due to a non-extension of the Agreement by the Employer, pursuant to Executives resignation for Good Reason, or by action of the Employer pursuant to Section 3.2 for any reason other than those encompassed by Section 3.2(a), 3.2(b), or 3.2(c), then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with such termination of employment, except that Executive shall be entitled to receive the Accrued Rights and, subject to Executives delivery, within 50 days after the Date of Termination, and non-revocation of an executed release in a form reasonably satisfactory to the Employer (which shall release and discharge the Company and its affiliates, subsidiaries and benefit plans, and their respective stockholders, officers, directors, members, partners, employees, agents representatives and other affiliated persons from any and all claims or causes of action of any kind or character, including but not limited to all claims or causes of action arising out of Executives employment with the Employer or its affiliates or the termination of such employment) (the Release), Executive shall receive the following additional compensation and benefits from the Company or the Employer, as applicable, (but no other additional compensation or benefits after such termination):
(a) Unpaid Prior Year Annual Bonus: The Employer shall pay to Executive any earned but unpaid Annual Bonus for the calendar year ending prior to the Date of Termination, which amount shall be payable in a lump-sum on or before the date such annual bonuses are paid to executives who have continued employment with the Employer (but in no event earlier than 60 days after the Date of Termination;
(b) Prorated Current Year Annual Bonus: The Employer shall pay to Executive a bonus for the calendar year in which the Date of Termination occurs in an amount equal to the greater of the (A) Annual Bonus for the immediately prior completed year and (B) Executives target bonus opportunity for the year including the Date of Termination, which amount shall be prorated through and including the Date of Termination (based on the ratio of the number of days Executive was employed by the Employer during such year to the number of days in such year), payable in a lump-sum on or before the date such annual bonuses are paid to executives who have continued employment with the Employer (but in no event earlier than 60 days after the Date of Termination nor later than the March 15 next following such calendar year); provided, however, that if this paragraph applies with respect to an Annual Bonus that is intended to constitute performance-based compensation within the meaning of, and for purposes of, section 162(m) of the Code, then the amount described in (A) and (B) above shall be replaced with the amount of Annual Bonus for the year including the Date of Termination, as determined in good faith by the Board in accordance with the criteria
established pursuant to Section 4.2 and based on the Companys performance for such year, and this paragraph shall apply with respect to such Annual Bonus only to the extent the applicable performance criteria have been satisfied as certified by a committee of the Board as required under section 162(m) of the Code;
(c) Severance Payment: The Employer shall pay to Executive a severance amount equal to two times the sum of (i) Executives Base Salary as of the Date of Termination and (ii) the Average Annual Bonus, which amount shall be paid in a lump sum payment on the date that is 60 days after the Date of Termination occurs; provided, however, that in the event that Executives Date of Termination under this Section 5.3(c) occurs within twelve (12) months following a Change in Control, such severance amount shall equal three times the sum of clauses (i) and (ii) of this Section 5.3(c);
(d) Post-Employment Health Coverage: During the portion, if any, of the 18-month period following the Date of Termination that Executive elects to continue coverage for Executive and Executives spouse and eligible dependents, if any, under the Companys or the Employers group health plans under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), and/or sections 601 through 608 of the Employee Retirement Income Security Act of 1974, as amended, the Employer shall promptly reimburse Executive on a monthly basis for the difference between the amount Executive pays to effect and continue such coverage and the employee contribution amount that similarly situated active senior executive employees of the Company pay for the same or similar coverage under such group health plans; provided, however, that in the event that Executive becomes eligible for group health coverage from a subsequent employer, the reimbursements provided by the Employer under this Section 5.3(d)) shall immediately cease; and
(e) Equity Awards: Notwithstanding anything to the contrary included in any award agreement, 100% of outstanding equity-related awards held by the Executive shall immediately vest with respect to time-based vesting provisions (and any performance-based vesting will vest based on actual performance through the end of the performance period), and all options, stock appreciation rights, or similar awards shall remain exercisable for the full original term of the award.
ARTICLE VI
PROTECTION OF INFORMATION
6.1 Disclosure to and Property of the Company. For purposes of this Article VI, the term the Company shall include the Company and any of its affiliates, and any reference to employment or similar terms shall include a director and/or consulting relationship. All information, trade secrets, designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether patentable or not, that are conceived, made, developed, disclosed to or acquired by Executive, individually or in conjunction with others, during the period of Executives employment by the Company (whether during business hours or otherwise and whether on the Companys premises or otherwise) that relate to the Companys or any of its
affiliates businesses, trade secrets, products or services (including, without limitation, all such information relating to corporate opportunities, strategies, business plans, product specifications, compositions, manufacturing and distribution methods and processes, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customers organizations or within the organization of acquisition prospects, or production, marketing and merchandising techniques, prospective names and marks) and all writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, Confidential Information) shall be disclosed to the Company and are and shall be the sole and exclusive property of the Company or its affiliates, as applicable. Moreover, all documents, videotapes, written presentations, brochures, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, drawings, architectural renditions, models and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, Work Product) are and shall be the sole and exclusive property of the Company (or its affiliates). Executive agrees to perform all actions reasonably requested by the Company or its affiliates to establish and confirm such exclusive ownership. Upon termination of Executives employment with the Company, for any reason, Executive promptly shall deliver such Confidential Information and Work Product, and all copies thereof, to the Company.
6.2 Disclosure to Executive. The Company has and will disclose to Executive and place Executive in a position to have access to or develop Confidential Information and Work Product of the Company (or its affiliates); and has and will entrust Executive with business opportunities of the Company (or its affiliates); and has and will place Executive in a position to develop business good will on behalf of the Company (or its affiliates).
6.3 No Unauthorized Use or Disclosure.
(a) Executive agrees to preserve and protect the confidentiality of all Confidential Information and Work Product of the Company and its affiliates. Executive agrees that Executive will not, at any time during or after Executives employment with the Company, make any unauthorized disclosure of, and Executive shall not remove from the Company premises, Confidential Information or Work Product of the Company or its affiliates, or make any use thereof, except, in each case, in the carrying out of Executives responsibilities hereunder. Executive shall use all reasonable efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by Executive hereunder to preserve and protect the confidentiality of such Confidential Information.
(b) Executive shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure thereof is specifically required by law; provided, however, that in the event disclosure is required by applicable law, Executive shall provide the Company with prompt notice of such requirement prior to making any such disclosure, so that the Company may seek an appropriate protective order.
(c) At the request of the Company at any time, Executive agrees to deliver to the Company all Confidential Information that Executive may possess or control. Executive agrees that all Confidential Information of the Company (whether now or hereafter existing) conceived, discovered or made by Executive during the period of Executives employment by the Company exclusively belongs to the Company (and not to Executive), and upon request by the Company for specified Confidential Information, Executive will promptly disclose such Confidential Information to the Company and perform all actions reasonably requested by the Company to establish and confirm such exclusive ownership. Affiliates of the Company shall be third party beneficiaries of Executives obligations under this Article VI. As a result of Executives employment by the Company, Executive may also from time to time have access to, or knowledge of, Confidential Information or Work Product of third parties, such as customers, suppliers, partners, joint venturers, and the like, of the Company and its affiliates. Executive also agrees to preserve and protect the confidentiality of such third party Confidential Information and Work Product.
(d) Nothing herein will prevent Executive from: (i) making a good faith report of possible violations of applicable law to any governmental agency or entity; or (ii) making disclosures that are protected under the whistleblower provisions of applicable law. For the avoidance of doubt, nothing herein shall prevent Executive from making a disclosure of a trade secret that: (A) is made in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, an individual who files a lawsuit for retaliation by an employer of reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (X) files any document containing the trade secret under seal; and (Y) does not disclose the trade secret, except pursuant to court order.
6.4 Ownership by the Company. If, during Executives employment by the Company, Executive creates any work of authorship fixed in any tangible medium of expression that is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to the Companys business, products, or services, whether such work is created solely by Executive or jointly with others (whether during business hours or otherwise and whether on the Companys premises or otherwise), including any Work Product, the Company shall be deemed the author of such work if the work is prepared by Executive in the scope of Executives employment; or, if the work relating to the Companys business, products, or services is not prepared by Executive within the scope of Executives employment but is specially ordered by the Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and the Company shall be the author of the work. If the work relating to the Companys business, products, or services is neither prepared by Executive within the scope of Executives employment nor a work specially ordered that is deemed to be a work made for hire during Executives employment by the Company, then Executive hereby
agrees to assign, and by these presents does assign, to the Company all of Executives worldwide right, title, and interest in and to such work and all rights of copyright therein.
6.5 Assistance by Executive. During the period of Executives employment by the Company, Executive shall assist the Company and its nominee, at any time, in the protection of the Companys or its affiliates worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee(s) and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries. For the period of two (2) years after Executives employment termination with the Company pursuant to Section 5.3 above, at the request from time to time and expense of the Company or its affiliates, Executive shall assist the Company or its nominee(s) in the protection of the Companys or its affiliates worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries. Executive shall assist after Executives employment termination with the Company other than pursuant to Section 5.3 above pursuant to mutually agreeable terms between the Executive and the Company.
6.6 Remedies. Executive acknowledges that money damages would not be a sufficient remedy for any breach of this Article VI by Executive, and the Company or its affiliates shall be entitled to enforce the provisions of this Article VI by terminating payments or benefits then owing to Executive under Section 5.3and to specific performance and injunctive relief as remedies for such breach or any threatened breach; provided, that, to the extent the Company receives monetary damages from the Executive, such amounts shall not exceed the total value Executive received under Section 5.3. Such remedies shall not be deemed the exclusive remedies for a breach of this Article VI but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Executive and Executives agents. However, if it is determined that Executive has not committed a breach of this Article VI, then the Company shall resume the payments and benefits due under this Agreement and pay to Executive and Executives spouse, if applicable, all payments and benefits that had been suspended pending such determination.
ARTICLE VII
STATEMENTS CONCERNING THE COMPANY
7.1 Statements Concerning the Company. Executive shall refrain, both during and after the termination of the employment relationship, from publishing any oral or written statements about the Company, any of its affiliates or any of the Companys or such affiliates directors, officers, employees, consultants, agents or representatives that (a) are slanderous, libelous or defamatory, (b) disclose Confidential Information of the Company, any of its affiliates or any of the Companys or any such affiliates business affairs, directors, officers, employees, consultants, agents or representatives, or (c) place the Company, any of its affiliates, or any of the Companys or any such affiliates directors, officers, employees, consultants, agents or representatives in a false light before the public. The Company agrees that the members of the Board and the Companys named executive officers, while serving in such capacity for the Company, shall not make negative comments about the Executive or otherwise disparage the
Executive in any manner that is likely to be harmful to the Executives business reputation. The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings), and the foregoing limitation on the Companys executives and directors shall not be violated by statements that they in good faith believe are necessary or appropriate to make in connection with performing their duties and obligations to the Company. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded the Company and its affiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law.
7.2 Enforcement Rights. A violation or threatened violation of this Article VII may be enjoined by the courts. The rights afforded the Company and its affiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law.
ARTICLE VIII
NON-COMPETITION AGREEMENT
8.1 Definitions. As used in this Article VIII, the following terms shall have the following meanings:
Business means (a) during the period of Executives employment by the Company, the core products and services provided by the Company and its affiliates during such period and other products and services that are functionally equivalent to the foregoing, and (b) during the portion of the Prohibited Period that begins on the termination of Executives employment with the Employer, the products and services provided by the Company and its affiliates at the time of such termination of employment and other products and services that are functionally equivalent to the foregoing.
Competing Business means any business, individual, partnership, firm, corporation or other entity which wholly or in any significant part engages in any business competing with the Business in the Restricted Area. In no event will the Company or any of its affiliates be deemed a Competing Business.
Governmental Authority means any governmental, quasi-governmental, state, county, city or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof.
Legal Requirement means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization, or other directional requirement (including, without limitation, any of the foregoing that relates to environmental standards or controls, energy regulations and occupational, safety and health standards or controls including those arising under environmental laws) of any Governmental Authority.
Prohibited Period means the period during which Executive is employed by the Employer hereunder and a period of two years following the termination of Executives employment with the Employer.
Restricted Area means any geographic area within a 100-mile radius of any location where the Company or its affiliates engages in the Business, and for which Executive has or had responsibilities, during the period of Executives employment.
8.2 Non-Competition; Non-Solicitation. Executive and Extractionagree to the non-competition and non-solicitation provisions of this Article VIII in consideration for the Confidential Information provided by Extractoin to Executive pursuant to Article VI of this Agreement, to protect the trade secrets and confidential information of the Company or its affiliates disclosed or entrusted to Executive by the Company or its affiliates or created or developed by Executive for the Company or its affiliates, to protect the business goodwill of the Company or its affiliates developed through the efforts of Executive and/or the business opportunities disclosed or entrusted to Executive by the Company or its affiliates and as an additional incentive for Extraction to enter into this Agreement.
(a) Subject to the exceptions set forth in Section 8.2(b) below, Executive expressly covenants and agrees that during the Prohibited Period (i) Executive will refrain from carrying on or engaging in, directly or indirectly, any Competing Business in the Restricted Area and (ii) Executive will not, and Executive will cause Executives affiliates not to, directly or indirectly, own, manage, operate, join, become an employee of, partner in, owner or member of (or an independent contractor to), control or participate in, be connected with or loan money to, sell or lease equipment or property to, or otherwise be affiliated with any business, individual, partnership, firm, corporation or other entity which engages in a Competing Business in the Restricted Area.
(b) Notwithstanding the restrictions contained in Section 8.2(a), Executive or any of Executives affiliates may own an aggregate of not more than 2% of the outstanding stock of any class of any corporation engaged in a Competing Business, if such stock is listed on a national securities exchange or regularly traded in the over-the-counter market by a member of a national securities exchange, without violating the provisions of Section 8.2(a), provided that neither Executive nor any of Executives affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation.
(c) Executive further expressly covenants and agrees that during the Prohibited Period, Executive will not, and Executive will cause Executives affiliates not to (i) engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of the Company or any of its affiliates or (ii) canvass, solicit, approach or entice away or cause to be canvassed, solicited, approached or enticed away from the Company or any of its affiliates any person who or which is a customer of any of such entities during the period during which Executive is employed by the Employer.
(d) The restrictions contained in Section 8.2 shall not apply to any product or service that the Company or the Employer provided during Executives employment but that the Company or the Employer no longer provides at the Date of Termination.
(e) Before accepting employment with any other person or entity while employed by the Employer during the Prohibited Period, the Executive will inform such person or entity of the restrictions contained in this Article VIII.
8.3 Relief. Executive and Extraction agree and acknowledge that the limitations as to time, geographical area and scope of activity to be restrained as set forth in Section 8.2 are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of Extraction. Executive and Extraction also acknowledge that money damages would not be sufficient remedy for any breach of this Article VIII by Executive, and the Company or its affiliates shall be entitled to enforce the provisions of this Article VIII by terminating payments or benefits then owing to Executive under Section 5.3 and to specific performance and injunctive relief as remedies for such breach or any threatened breach; provided, that, to the extent the Company or the Employer receives monetary damages from the Executive, such amounts shall not exceed the total value Executive received under Section 5.3. Such remedies shall not be deemed the exclusive remedies for a breach of this Article VIII but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Executive and Executives agents. However, if it is determined that Executive has not committed a breach of this Article VIII, then Extraction shall resume the payments and benefits due under this Agreement and pay to Executive all payments and benefits that had been suspended pending such determination.
8.4 Reasonableness; Enforcement. Executive hereby represents to Extraction that Executive has read and understands, and agrees to be bound by, the terms of this Article VIII. Executive acknowledges that the geographic scope and duration of the covenants contained in this Article VIII are the result of arms-length bargaining and are fair and reasonable in light of (a) the nature and wide geographic scope of the operations of the Business, (b) Executives level of control over and contact with the Business in all jurisdictions in which it is conducted, (c) the fact that the Business is conducted throughout the Restricted Area and (d)the amount of Confidential Information that Executive is receiving in connection with the performance of Executives duties hereunder. It is the desire and intent of the parties that the provisions of this Article VIII be enforced to the fullest extent permitted under applicable Legal Requirements, whether now or hereafter in effect and therefore, to the extent permitted by applicable Legal Requirements, Executive and Extraction hereby waive any provision of applicable Legal Requirements that would render any provision of this Article VIII invalid or unenforceable.
8.5 Reformation. Extraction and Executive agree that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Article VIII would cause irreparable injury to Extraction. Executive understands that the foregoing restrictions may limit Executives ability to engage in certain businesses anywhere in the Restricted Area during the Prohibited Period, but acknowledges that Executive will receive sufficient consideration from Extraction to justify such restriction. Further, Executive acknowledges that Executives skills are such that Executive can be gainfully employed in non-competitive employment, and that the agreement not to compete will not prevent Executive from earning a living. Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified,
to be fully enforced. By agreeing to this contractual modification prospectively at this time, Extraction and Executive intend to make this provision enforceable under the law or laws of all applicable States, Provinces and other jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal. Such modification shall not affect the payments made to Executive under this Agreement.
ARTICLE IX
DISPUTE RESOLUTION
9.1 Arbitration. Except as otherwise provided in this Article IX, any and all claims or disputes between Executive and the Company or its parents, subsidiaries and affiliates (including, without limitation, the validity, scope, and enforceability of this Article IX and claims arising under any federal, state or local law prohibiting discrimination in employment or governing the employment relationship in any way) shall be submitted for final and binding arbitration by a single arbitrator in Denver, Colorado, in accordance with the rules for resolution of employment disputes of the American Arbitration Association (AAA). The arbitrator shall have the power to gather such materials, information, testimony, and evidence as he or she deems relevant to the dispute before him or her, and each party will provide such materials, information, testimony, and evidence requested by the arbitrator, except to the extent any information so requested is subject to an attorney-client or other privilege. The arbitrator shall apply the substantive law of the State of Colorado (excluding Colorado choice-of-law principles that might call for the application of some other states law), or federal law, or both as applicable to the claims asserted. The results of the arbitration and the decision of the arbitrator will be final and binding on the parties and each party agrees and acknowledges that these results shall be enforceable in a court of law of competent jurisdiction; provided that the parties agree that the arbitrator and any court enforcing the award of the arbitrator shall not have the right or authority to award punitive or exemplary damages to any disputing party. No demand for arbitration may be made after the date when the institution of legal or equitable proceedings based on such claim or dispute would be barred by the applicable statute of limitations. In the event either party must resort to the judicial process to enforce the provisions of this Agreement, the award of an arbitrator, or equitable relief granted by an arbitrator, the party seeking enforcement shall be entitled to recover from the other party all costs of litigation including, but not limited to, reasonable attorneys fees and court costs. All proceedings conducted pursuant to this agreement to arbitrate, including any order, decision or award of the arbitrator, shall be kept confidential by all parties. Executive and Extraction explicitly recognize that no provision of this Article IX shall prevent either party from seeking to resolve any dispute relating to Article VI or Article VIII of this Agreement in a court of law. Executive and Extraction further acknowledge and agree that a court of competent jurisdiction shall have the power to maintain the status quo pending the arbitration of any dispute under this Article IX, and this Article IX shall not require the arbitration of an application for emergency or temporary injunctive relief by either party pending arbitration; provided, however, that the remainder of any such dispute beyond the application for emergency or temporary injunctive relief shall be subject to arbitration under this Article IX. EXECUTIVE ACKNOWLEDGES THAT, BY SIGNING THIS AGREEMENT, EXECUTIVE IS WAIVING ANY RIGHT THAT EXECUTIVE MAY HAVE TO A JURY TRIAL OR, EXCEPT AS EXPRESSLY PROVIDED HEREIN, A COURT TRIAL OF ANY CLAIM ALLEGED BY EXECUTIVE.
ARTICLE X
CERTAIN EXCISE TAXES
Notwithstanding anything to the contrary in this Agreement, if Executive is a disqualified individual (as defined in section 280G(c) of the Code), and the payments and benefits provided for in this Agreement, together with any other payments and benefits which Executive has the right to receive from the Company or any of its affiliates, would constitute a parachute payment (as defined in section 280G(b)(2) of the Code), then the payments and benefits provided for in this Agreement shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive from the Company and its affiliates will be one dollar ($1.00) less than three times Executives base amount (as defined in section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Executive shall be subject to the excise tax imposed by section 4999 of the Code, or (b) paid in full, whichever produces the better net after-tax position to Executive (taking into account any applicable excise tax under section 4999 of the Code and any other applicable taxes, including any federal, state, municipal, and local income or employment taxes, and taking into account the phase out of itemized deductions and personal exemptions). The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then, reducing any benefit to be provided in-kind hereunder in a similar order, in all instances in accordance with Section 409A. The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by the Company or the Employer in good faith; provided, however, that (a) no portion of Executives payments or benefits the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a payment within the meaning of section 280G(b) of the Code will be taken into account; (b) no portion of Executives payments or benefits will be taken into account which, in the opinion of tax counsel (Tax Counsel) for the Company does not constitute a parachute payment (including by reason of section 280G(b)(4)(A) of the Code); (c) in calculating the applicable excise tax under section 4999 of the Code, no portion of Executives payments or benefits will be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of the base amount that is allocable to such reasonable compensation; and (d) the value of any non-cash benefit or any deferred payment or benefit will be determined by Tax Counsel or the Companys independent auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. At the time that payments are made under this Agreement, the Company will provide Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations, including any opinions or other advice the Company received from Tax Counsel, the Companys independent auditor, or other advisors or consultants (and any such opinions or advice which are in writing will be attached to the statement). If a reduced payment or benefit is made or provided, and through error or otherwise, that payment or benefit, when aggregated with other payments and benefits from the Company (or its affiliates) used in determining if a parachute payment exists, exceeds one dollar ($1.00) less than three times Executives base amount, then Executive shall immediately repay such excess to the Company or the applicable affiliate upon notification that an overpayment has been made. The fact that Executives right to
payments or benefits may be reduced by reason of the limitations contained in this Article X will not limit or otherwise affect any other rights of Executive under this Agreement or otherwise. All determinations required by this Article X will be made at the expense of the Company. However, nothing in this Article X shall require the Company or any affiliate to be responsible for, or have any liability or obligation with respect to, Executives excise tax liabilities under section 4999 of the Code.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (a) when received if delivered personally or by courier, (b) on the date receipt is acknowledged if delivered by certified mail, postage prepaid, return receipt requested or (c) one day after transmission if sent by facsimile transmission with confirmation of transmission, as follows:
If to Executive, addressed to: |
Matthew R. Owens |
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Extraction Oil & Gas, Inc. |
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370 17th Street, Suite 5300 |
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Denver, CO 80202, or the last known |
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residential address reflected in the |
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Employers records |
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Facsimile: |
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If to the Company or the Employer, addressed to: |
Extraction Oil & Gas, Inc. |
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370 17th Street, Suite 5300 Denver, CO 80202 |
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Attention: |
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Facsimile: |
or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.
11.2 Applicable Law; Submission to Jurisdiction.
(a) This Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of Colorado, without regard to conflicts of laws principles thereof.
(b) With respect to any claim or dispute related to or arising under this Agreement, the parties hereto hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in the State of Colorado.
11.3 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this
Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
11.4 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.
11.5 Counterparts. 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 Agreement.
11.6 Withholding of Taxes and Other Employee Deductions. The Employer or the Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes and withholdings as may be required pursuant to any law or governmental regulation or ruling and all other customary deductions made with respect to the Companys employees generally.
11.7 Headings. The Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.
11.8 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.
11.9 Affiliate. As used in this Agreement, the term affiliate as used with respect to a particular person or entity shall mean any other person or entity which owns or controls, is owned or controlled by, or is under common ownership or control with, such particular person or entity.
11.10 Successors; Assigns; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Company and the Employer and any successor of the Company or the Employer. In addition, the Employer may assign this Agreement and Executives employment to any other affiliate of the Company at any time without the consent of Executive, and any assign of the Employer shall be deemed to be the Employer for purposes of this Agreement. Except as provided in the foregoing sentences of this Section 11.10, this Agreement and the rights and obligations of the parties hereunder are personal, and neither this Agreement nor any right, benefit, or obligation of either party hereto shall be subject to voluntary or involuntary assignment, alienation, or transfer, whether by operation of law or otherwise, without the prior written consent of the other party. In addition, any payment owed to Executive hereunder after the date of Executives death shall be paid to Executives estate. Each affiliate of the Company shall be a third party beneficiary of, and may directly enforce, Executives obligations under Article VI, Article VII and Article VIII.
11.11 Term. Termination of this Agreement shall not affect any right or obligation of any party which is accrued or vested prior to such termination. Without limiting the scope of the preceding sentence, the provisions of Articles V, VI, VII, VIII and IX shall survive any termination of the employment relationship and/or of this Agreement.
11.12 Entire Agreement. Except as provided in any signed written agreement contemporaneously or hereafter executed by the Company or the Employer and Executive, this Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by the Employer. Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution of this Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect.
11.13 Modification; Waiver. Any modification to or waiver of this Agreement will be effective only if it is in writing and signed by the parties to this Agreement.
11.14 Actions by the Board. Any and all determinations or other actions required of the Board hereunder that relate specifically to Executives employment by the Employer or the terms and conditions of such employment shall be made by the members of the Board other than Executive if Executive is a member of the Board, and Executive shall not have any right to vote or decide upon any such matter.
11.15 Executives Representations and Warranties. Executive represents and warrants to Extraction that (a) Executive does not have any agreements with any prior employers or other third parties that will prohibit Executive from working for Extraction or fulfilling Executives duties and obligations to Extraction pursuant to this Agreement and (b) Executive has complied with all duties imposed on Executive with respect to Executives former employer, e.g., Executive does not possess any tangible property belonging to Executives former employer.
11.16 Section 409A. The parties hereby agree that this Agreement is intended to satisfy the requirements of Section 409A with respect to amounts, if any, subject thereto and shall be interpreted, construed, and administered consistent with such intent. Each payment made under this Agreement shall be deemed to be a separate payment for purposes of Section 409A. Notwithstanding any provision in this Agreement to the contrary, if Executive is a specified employee (as such term is defined in Section 409A and as determined by the Employer in accordance with any method permitted under Section 409A) and any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if Executives receipt of such payment or benefit is not delayed until the Section 409A Payment Date, then such payment or benefit shall not be provided to Executive (or Executives estate, if applicable) until the Section 409A Payment Date. Notwithstanding anything to the contrary in this Agreement or elsewhere, any payment or benefit under this Agreement or otherwise that is exempt from Section 409A pursuant to Treasury Regulation § 1.409A-l(b)(9)(v)(A) or (C) (relating to certain reimbursements and in-kind benefits) shall be paid or provided only to the extent that the expenses are not incurred, or the benefits are not provided, beyond the last day of the second calendar year following the calendar year in which Executives separation from service occurs; and provided further that such expenses are reimbursed no later than the last day of the third calendar year following the calendar year in which Executives separation from service occurs. To the extent any expense reimbursement or the provision of any in-kind benefit is determined to be subject to Section 409A (and not exempt pursuant to the prior sentence or otherwise) (i) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit, (ii) the amount of any such expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (iii) such payments shall be made on or before the last day of Executives taxable year following the taxable year in which the expense occurred.
11.17 Clawback. Notwithstanding any provisions in this Agreement to the contrary, any compensation, payments, or benefits provided hereunder, whether in the form of cash or otherwise, shall be subject to a clawback to the extent necessary to comply with the requirements of any applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, section 304 of the Sarbanes Oxley Act of 2002, or any regulations promulgated thereunder, or any policy adopted by the Company pursuant to any such law (whether in existence as of the Effective Date or later adopted).
[Signatures begin on next page.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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EXTRACTION OIL & GAS, INC. | |||
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Mark A. Erickson | |
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Chief Executive Officer | |
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XOG SERVICES, LLC | |||
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/s/ Mark A. Erickson | ||
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Mark A. Erickson | |
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Chief Executive Officer | |
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MATTHEW R. OWENS | |||
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/s/ Matthew R. Owens | |||
SIGNATURE PAGE TO
EMPLOYMENT AGREEMENT
MATTHEW R. OWENS
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (Agreement) is made by and between Extraction Oil & Gas, Inc., a Delaware corporation (the Company), XOG Services, LLC (the Employer and together with the Company, Extraction) and Russell T. Kelley, Jr. (Executive) effective as of immediately prior to the effectiveness of the registration statement filed in connection with the initial public offering of the securities of the Company, which is October 11, 2016 (the Effective Date), and hereby amends and replaces in its entirety any other employment agreement heretofore entered into between Executive and the Employer or any of its affiliates.
W I T N E S S E T H:
WHEREAS, the Employer currently employs Executive as its President; and
WHEREAS, the Employer desires to continue to employ Executive on the terms and conditions, and for the consideration, hereinafter set forth and Executive desires to continue to be employed by the Employer on such terms and conditions and for such consideration.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, the Company, the Employer, and Executive agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined in the body of this Agreement, for purposes of this Agreement, the following capitalized words shall have the meanings indicated below:
1.1 Average Annual Bonus shall mean the average Annual Bonus paid (or payable) for the two calendar years (or if Executive was employed for less than two full calendar years such lesser number of full calendar years for which Executive was employed) preceding the Date of Termination.
1.2 Board shall mean the Board of Directors of the Company.
1.3 Cause shall mean a determination by the Employer that Executive (a) has engaged in gross negligence, gross incompetence or willful misconduct in the performance of Executives duties with respect to the Company or any of its affiliates, (b) has failed without proper legal reason to substantially perform Executives duties and responsibilities to the Company or any of its affiliates, (c) has materially breached any provision of this Agreement, (d) has committed an act of theft, fraud, embezzlement, misappropriation or willful breach of a fiduciary duty to the Company or any of its affiliates, or (e) has been convicted of, pleaded no contest to or received adjudicated probation or deferred adjudication in connection with a crime involving fraud, dishonesty or moral turpitude or any felony (or a crime of similar import in a foreign jurisdiction). In order to terminate Executives employment for Cause, the Employer must provide the Executive with a written notice providing in reasonable detail the specific circumstances alleged to constitute Cause and the Executive must not have cured or remedied the
alleged Cause event (if susceptible to cure) in the Employers good faith judgment within thirty (30) days after his receipt of such notice.
1.4 Change in Control shall mean:
(a) a merger of the Company with another entity, a consolidation involving the Company, or the sale of all or substantially all of the assets of the Company to another entity if, in any such case, (i) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event or (ii) the persons who were members of the Board immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event;
(b) the dissolution or liquidation of the Company;
(c) when any person or entity, including a group as contemplated by section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the combined voting power of the outstanding securities of the Company; or
(d) as a result of or in connection with a contested election of directors, the persons who were members of the Board immediately before such election shall cease to constitute a majority of the Board.
For purposes of the preceding sentence, (i) resulting entity in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common stock of the Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, and (ii) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term Company shall refer to the resulting entity and the term Board shall refer to the board of directors (or comparable governing body) of the resulting entity.
1.5 Code shall mean the Internal Revenue Code of 1986, as amended.
1.6 Date of Termination shall mean the date Executives employment with the Employer is considered to have terminated pursuant to Section 3.5.
1.7 Good Reason shall mean the occurrence of any of the following events:
(a) a material diminution in Executives Base Salary; or
(b) a material diminution in Executives authority, duties, or responsibilities; or
(c) the involuntary relocation of the geographic location of Executives principal place of employment by more than 50 miles from the location of Executives principal place of employment as of the Effective Date; or
(d) a material breach by the Company or the Employer of this Agreement.
Notwithstanding the foregoing provisions of this Section 1.7 or any other provision in this Agreement to the contrary, any assertion by Executive of a termination of employment for Good Reason shall not be effective unless all of the following conditions are satisfied: (i) the condition described in Section 1.7(a), (b) or (c) giving rise to Executives termination of employment must have arisen without Executives consent; (ii) Executive must provide written notice to the Employer of such condition in accordance with Section 11.1 within 45 days of the later of the initial existence of the condition or when Executive first learns of the existence of the condition (provided that such notice, if provided within 45 days of when Executive first learns of the existence of the condition, must in all circumstances be provided no later than 90 days following the initial existence of the condition); (iii) the condition specified in such notice must remain uncorrected for 30 days after receipt of such notice by the Employer; and (iv) the date of Executives termination of employment must occur within 90 days after the initial existence of the condition specified in such notice or when Executive first learns of the existence of the condition (provided, however, that such termination may in no circumstance occur later than two years following the initial existence of the condition).
1.8 Notice of Termination shall mean a written notice delivered to the other party indicating the specific termination provision in this Agreement relied upon for termination of Executives employment and the intended Date of Termination and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated.
1.9 Section 409A shall mean section 409A of the Code and the Treasury Regulations and other interpretative guidance issued thereunder.
1.10 Section 409A Payment Date shall mean the earlier of (a) the date of Executives death or (b) the date that is six months after the date of termination of Executives employment with the Employer.
ARTICLE II
EMPLOYMENT AND DUTIES
2.1 Employment; Effective Date. The Employer agrees to continue to employ Executive, and Executive agrees to continue to be employed by the Employer, pursuant to the terms of this Agreement beginning as of the Effective Date and continuing for the period of time set forth in Article III of this Agreement, subject to the terms and conditions of this Agreement.
2.2 Positions. From and after the Effective Date, the Employer shall employ Executive in the position of Chief Financial Officer of the Employer and of the
Company or in such other position or positions as the parties may mutually agree, and Executive shall report to the Chief Executive Officer of the Company.
2.3 Duties and Services. Executive agrees to serve in the position referred to in Section 2.2 and to perform diligently and to the best of Executives abilities the duties and services appertaining to such position, as well as (a) such additional reasonably specific duties and services that Executive from time to time may be reasonably directed to perform by the Employer that are reasonably consistent with such position, and (b) such additional duties and services appropriate to such position(s) which the parties mutually agree upon from time to time.
2.4 Other Interests. Executive agrees, during the period of Executives employment by the Employer, to devote substantially all of Executives business time, energy and best efforts to the business and affairs of the Company and its affiliates. Notwithstanding the foregoing, the parties acknowledge and agree that Executive may (a) engage in and manage Executives passive personal investments and (b) engage in charitable and civic activities, including service as a member of the Board of Trustees of Redeemer Seminary; provided, however, that such activities shall be permitted so long as such activities do not materially conflict with the business and affairs of the Company or its affiliates or materially interfere with Executives performance of Executives duties hereunder.
2.5 Duty of Loyalty. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity and allegiance to act in the best interests of the Company and its affiliates and to do no act that would materially injure the business, interests, or reputation of the Company or any of its affiliates. In keeping with these duties, Executive shall make full disclosure to the Company of all business opportunities pertaining to the Companys business and shall not appropriate for Executives own benefit business opportunities concerning the subject matter of the fiduciary relationship.
ARTICLE III
TERM AND TERMINATION OF EMPLOYMENT
3.1 Term. Unless sooner terminated pursuant to other provisions hereof, the Employer agrees to continue to employ Executive for the period beginning on the Effective Date and ending on the third anniversary of the Effective Date (the Initial Expiration Date); provided, however, that beginning on the Initial Expiration Date, and on each anniversary of the Initial Expiration Date thereafter, if Executives employment under this Agreement has not been terminated pursuant to Section 3.2 or 3.3, then said term of employment shall automatically be extended for successive one-year periods unless on or before the date that is 90 days prior to the first day of any such extension period either party shall give written notice to the other that no such automatic extension shall occur, in which case the term of employment shall terminate as of the end of the current term.
3.2 Employers Right to Terminate. Notwithstanding the provisions of Section 3.1, the Employer may terminate Executives employment under this Agreement at any time for any of the following reasons by providing Executive with a Notice of Termination:
(a) upon Executive being unable to perform Executives duties or fulfill Executives obligations under this Agreement by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than [ ] months as determined by the Company and certified in writing by a competent medical physician selected by the Company; or
(b) Executives death; or
(c) for Cause; or
(d) for any other reason whatsoever or for no reason at all, in the sole discretion of the Employer.
3.3 Executives Right to Terminate. Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate Executives employment under this Agreement for Good Reason or for any other reason whatsoever or for no reason at all, in the sole discretion of Executive, by providing the Employer with a Notice of Termination. In the case of a termination of employment by Executive pursuant to this Section 3.3, the Date of Termination specified in the Notice of Termination shall not be less than 15 nor more than 60 days, respectively, from the date such Notice of Termination is given, and the Employer may require a Date of Termination earlier than that specified in the Notice of Termination (and, if such earlier Date of Termination is so required, it shall not change the basis for Executives termination nor be construed or interpreted as a termination of employment pursuant to Section 3.1 or Section 3.2).
3.4 Deemed Resignations. Unless otherwise agreed to in writing by the Company or the Employer and Executive prior to the termination of Executives employment, any termination of Executives employment shall constitute (a) an automatic resignation of Executive as an officer of the Company and each affiliate of the Company and (b) an automatic resignation of Executive from the Board (if applicable), from the board of directors of any affiliate of the Company and from the board of directors or similar governing body of any corporation, limited liability entity or other entity in which the Company or any affiliate holds an equity interest and with respect to which board or similar governing body Executive serves as the Companys or such affiliates designee or other representative.
3.5 Meaning of Termination of Employment. For all purposes of this Agreement, Executive shall be considered to have terminated employment with the Employer when Executive incurs a separation from service with the Employer within the meaning of section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.
ARTICLE IV
COMPENSATION AND BENEFITS
4.1 Base Salary. During the term of this Agreement, Executive shall receive a minimum, annualized base salary of $450,000 (the Base Salary). Executives annualized base salary shall be reviewed periodically by the Board (or a committee thereof) and, in the sole discretion of the Board (or a committee thereof), such annualized base salary may be increased (but not decreased) effective as of any date determined by the Board (or a committee thereof).
Executives Base Salary shall be paid in equal installments in accordance with the Employers standard policy regarding payment of compensation to executives but no less frequently than monthly.
4.2 Bonuses. Executive shall be eligible to receive an annual, calendar-year bonus (payable in a single lump sum) based on criteria determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company (the Annual Bonus), it being understood that (a) the target bonus at planned or targeted levels of performance shall equal no less than 100% of Executives Base Salary and (b) the actual amount of each Annual Bonus shall be determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company. The Employer shall use commercially reasonable efforts to pay each Annual Bonus with respect to a calendar year on or before March 15 of the following calendar year (and in no event shall an Annual Bonus be paid after December 31 of the following calendar year); provided, however, that (except as otherwise provided in Section 5.3) Executive will be entitled to receive payment of such Annual Bonus only if Executive is employed by the Employer on such date of payment. If Executive has not been employed by the Employer since January 1 of the year that includes the Effective Date, then the Annual Bonus for such year shall be prorated based on the ratio of the number of days during such calendar year that Executive was employed by the Employer to the number of days in such calendar year.
4.3 Equity Award. Executive shall be eligible to receive an annual performance-based equity award under the Companys then existing incentive equity plan based on vesting criteria determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company, with an expected target grant date fair value equal to 100% of Executives Base Salary. The Executives entitlement to any equity award remains subject to approval by the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company.
4.4 Other Benefits. During Executives employment hereunder, Executive shall be allowed to participate in all benefit plans and programs of Extraction, including improvements or modifications of the same, which are now, or may hereafter be, available to other senior executives of the Employer or the Company. Extraction shall not, however, by reason of this Section 4.3, be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such benefit plan or program, so long as such changes are similarly applicable to other senior executives generally.
4.5 Expenses. The Employer shall reimburse Executive for all reasonable business expenses incurred by Executive in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company or the Employer; provided, in each case, that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Employer. Any such reimbursement of expenses shall be made by the Employer upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to the Employer (but in any event not later than the close of Executives taxable year following the taxable year in which the expense is incurred by Executive); provided, however, that, upon Executives termination of employment with Extraction, in no event shall any additional
reimbursement be made prior to the Section 409A Payment Date to the extent such payment delay is required under section 409A(a)(2)(B)(i) of the Code. In no event shall any reimbursement be made to Executive for such fees and expenses after the later of (a) the first anniversary of the date of Executives death or (b) the date that is five years after the date of Executives termination of employment with the Employer (other than by reason of Executives death).
4.6 Vacation and Sick Leave. During Executives employment hereunder, Executive shall be entitled to sick and vacation leave in accordance with the Employers policies applicable to its senior executives, which leave shall accrue and be taken in accordance with the Employers sick and vacation policies in effect from time to time. Executives right to carry over unused vacation from one calendar year to the next shall be determined by the Employers vacation policy.
4.7 Offices. Subject to Articles II, III, and IV hereof, Executive agrees to serve without additional compensation, if elected or appointed thereto, as a director of the Company or any of the Companys affiliates and as a member of any committees of the board of directors of any such entities, and in one or more executive positions of any of the Companys affiliates.
ARTICLE V
EFFECT OF TERMINATION OF EMPLOYMENT ON COMPENSATION
5.1 For Cause; Without Good Reason; Certain Non-Renewals. If Executives employment hereunder shall terminate (a) at the expiration of the term provided in Section 3.1 (other than as provided under Section 5.3 below), (b) pursuant to Section 3.2(c), or (c) pursuant to Executives resignation for other than Good Reason, then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with such termination of employment, except that Executive shall be entitled to (i) payment of all accrued and unpaid Base Salary to the Date of Termination, (ii) reimbursement for all incurred but unreimbursed expenses for which Executive is entitled to reimbursement in accordance with Section 4.4, and (iii) benefits to which Executive is entitled under the terms of any applicable benefit plan or program (such amounts set forth in (i), (ii), and (iii) shall be collectively referred to herein as the Accrued Rights).
5.2 Death; Disability. If Executives employment hereunder shall terminate on account of his death or disability pursuant to Section 3.2(a) or (b), then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with such termination of employment, except that Executive (or Executives legal representative, estate, and/or beneficiaries, as the case may be) shall be entitled to receive:
(a) the Accrued Rights;
(b) a cash payment in an amount equal to one times the sum of (i) Executives Base Salary as of the Date of Termination and (ii) the Average Annual Bonus, which amount shall be paid in a lump sum cash payment on the date that is 60 days after the Date of Termination or, in the case of a termination on account of Executives death, as soon as administratively practicable following the Date of Termination but no later than
December 31 of the first calendar year following the calendar year during which the death occurs; and
(c) accelerated vesting of any outstanding equity-related awards held by the Executive with respect to time-based vesting provisions (with any performance-based vesting being determined based on actual performance through the end of the performance period).
5.3 Without Cause; for Good Reason; Certain Non-Renewals. If Executives employment hereunder shall terminate at the expiration of the term provided in Section 3.1 due to a non-extension of the Agreement by the Employer, pursuant to Executives resignation for Good Reason, or by action of the Employer pursuant to Section 3.2 for any reason other than those encompassed by Section 3.2(a), 3.2(b), or 3.2(c), then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with such termination of employment, except that Executive shall be entitled to receive the Accrued Rights and, subject to Executives delivery, within 50 days after the Date of Termination, and non-revocation of an executed release in a form reasonably satisfactory to the Employer (which shall release and discharge the Company and its affiliates, subsidiaries and benefit plans, and their respective stockholders, officers, directors, members, partners, employees, agents representatives and other affiliated persons from any and all claims or causes of action of any kind or character, including but not limited to all claims or causes of action arising out of Executives employment with the Employer or its affiliates or the termination of such employment) (the Release), Executive shall receive the following additional compensation and benefits from the Company or the Employer, as applicable, (but no other additional compensation or benefits after such termination):
(a) Unpaid Prior Year Annual Bonus: The Employer shall pay to Executive any earned but unpaid Annual Bonus for the calendar year ending prior to the Date of Termination, which amount shall be payable in a lump-sum on or before the date such annual bonuses are paid to executives who have continued employment with the Employer (but in no event earlier than 60 days after the Date of Termination;
(b) Prorated Current Year Annual Bonus: The Employer shall pay to Executive a bonus for the calendar year in which the Date of Termination occurs in an amount equal to the greater of the (A) Annual Bonus for the immediately prior completed year and (B) Executives target bonus opportunity for the year including the Date of Termination, which amount shall be prorated through and including the Date of Termination (based on the ratio of the number of days Executive was employed by the Employer during such year to the number of days in such year), payable in a lump-sum on or before the date such annual bonuses are paid to executives who have continued employment with the Employer (but in no event earlier than 60 days after the Date of Termination nor later than the March 15 next following such calendar year); provided, however, that if this paragraph applies with respect to an Annual Bonus that is intended to constitute performance-based compensation within the meaning of, and for purposes of, section 162(m) of the Code, then the amount described in (A) and (B) above shall be replaced with the amount of Annual Bonus for the year including the Date of Termination, as determined in good faith by the Board in accordance with the criteria
established pursuant to Section 4.2 and based on the Companys performance for such year, and this paragraph shall apply with respect to such Annual Bonus only to the extent the applicable performance criteria have been satisfied as certified by a committee of the Board as required under section 162(m) of the Code;
(c) Severance Payment: The Employer shall pay to Executive a severance amount equal to 1.5 times the sum of (i) Executives Base Salary as of the Date of Termination and (ii) the Average Annual Bonus, which amount shall be paid in a lump sum payment on the date that is 60 days after the Date of Termination occurs; provided, however, that in the event that Executives Date of Termination under this Section 5.3(c) occurs within twelve (12) months following a Change in Control, such severance amount shall equal two times the sum of clauses (i) and (ii) of this Section 5.3(c);
(d) Post-Employment Health Coverage: During the portion, if any, of the 18-month period following the Date of Termination that Executive elects to continue coverage for Executive and Executives spouse and eligible dependents, if any, under the Companys or the Employers group health plans under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), and/or sections 601 through 608 of the Employee Retirement Income Security Act of 1974, as amended, the Employer shall promptly reimburse Executive on a monthly basis for the difference between the amount Executive pays to effect and continue such coverage and the employee contribution amount that similarly situated active senior executive employees of the Company pay for the same or similar coverage under such group health plans; provided, however, that in the event that Executive becomes eligible for group health coverage from a subsequent employer, the reimbursements provided by the Employer under this Section 5.3(d)) shall immediately cease; and
(e) Equity Awards: Notwithstanding anything to the contrary included in any award agreement, 100% of outstanding equity-related awards held by the Executive shall immediately vest with respect to time-based vesting provisions (and any performance-based vesting will vest based on actual performance through the end of the performance period), and all options, stock appreciation rights, or similar awards shall remain exercisable for the full original term of the award.
ARTICLE VI
PROTECTION OF INFORMATION
6.1 Disclosure to and Property of the Company. For purposes of this Article VI, the term the Company shall include the Company and any of its affiliates, and any reference to employment or similar terms shall include a director and/or consulting relationship. All information, trade secrets, designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether patentable or not, that are conceived, made, developed, disclosed to or acquired by Executive, individually or in conjunction with others, during the period of Executives employment by the Company (whether during business hours or otherwise and whether on the Companys premises or otherwise) that relate to the Companys or any of its
affiliates businesses, trade secrets, products or services (including, without limitation, all such information relating to corporate opportunities, strategies, business plans, product specifications, compositions, manufacturing and distribution methods and processes, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customers organizations or within the organization of acquisition prospects, or production, marketing and merchandising techniques, prospective names and marks) and all writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, Confidential Information) shall be disclosed to the Company and are and shall be the sole and exclusive property of the Company or its affiliates, as applicable. Moreover, all documents, videotapes, written presentations, brochures, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, drawings, architectural renditions, models and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, Work Product) are and shall be the sole and exclusive property of the Company (or its affiliates). Executive agrees to perform all actions reasonably requested by the Company or its affiliates to establish and confirm such exclusive ownership. Upon termination of Executives employment with the Company, for any reason, Executive promptly shall deliver such Confidential Information and Work Product, and all copies thereof, to the Company.
6.2 Disclosure to Executive. The Company has and will disclose to Executive and place Executive in a position to have access to or develop Confidential Information and Work Product of the Company (or its affiliates); and has and will entrust Executive with business opportunities of the Company (or its affiliates); and has and will place Executive in a position to develop business good will on behalf of the Company (or its affiliates).
6.3 No Unauthorized Use or Disclosure.
(a) Executive agrees to preserve and protect the confidentiality of all Confidential Information and Work Product of the Company and its affiliates. Executive agrees that Executive will not, at any time during or after Executives employment with the Company, make any unauthorized disclosure of, and Executive shall not remove from the Company premises, Confidential Information or Work Product of the Company or its affiliates, or make any use thereof, except, in each case, in the carrying out of Executives responsibilities hereunder. Executive shall use all reasonable efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by Executive hereunder to preserve and protect the confidentiality of such Confidential Information.
(b) Executive shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure thereof is specifically required by law; provided, however, that in the event disclosure is required by applicable law, Executive shall provide the Company with prompt notice of such requirement prior to making any such disclosure, so that the Company may seek an appropriate protective order.
(c) At the request of the Company at any time, Executive agrees to deliver to the Company all Confidential Information that Executive may possess or control. Executive agrees that all Confidential Information of the Company (whether now or hereafter existing) conceived, discovered or made by Executive during the period of Executives employment by the Company exclusively belongs to the Company (and not to Executive), and upon request by the Company for specified Confidential Information, Executive will promptly disclose such Confidential Information to the Company and perform all actions reasonably requested by the Company to establish and confirm such exclusive ownership. Affiliates of the Company shall be third party beneficiaries of Executives obligations under this Article VI. As a result of Executives employment by the Company, Executive may also from time to time have access to, or knowledge of, Confidential Information or Work Product of third parties, such as customers, suppliers, partners, joint venturers, and the like, of the Company and its affiliates. Executive also agrees to preserve and protect the confidentiality of such third party Confidential Information and Work Product.
(d) Nothing herein will prevent Executive from: (i) making a good faith report of possible violations of applicable law to any governmental agency or entity; or (ii) making disclosures that are protected under the whistleblower provisions of applicable law. For the avoidance of doubt, nothing herein shall prevent Executive from making a disclosure of a trade secret that: (A) is made in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, an individual who files a lawsuit for retaliation by an employer of reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (X) files any document containing the trade secret under seal; and (Y) does not disclose the trade secret, except pursuant to court order.
6.4 Ownership by the Company. If, during Executives employment by the Company, Executive creates any work of authorship fixed in any tangible medium of expression that is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to the Companys business, products, or services, whether such work is created solely by Executive or jointly with others (whether during business hours or otherwise and whether on the Companys premises or otherwise), including any Work Product, the Company shall be deemed the author of such work if the work is prepared by Executive in the scope of Executives employment; or, if the work relating to the Companys business, products, or services is not prepared by Executive within the scope of Executives employment but is specially ordered by the Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and the Company shall be the author of the work. If the work relating to the Companys business, products, or services is neither prepared by Executive within the scope of Executives employment nor a work specially ordered that is deemed to be a work made for hire during Executives employment by the Company, then Executive hereby
agrees to assign, and by these presents does assign, to the Company all of Executives worldwide right, title, and interest in and to such work and all rights of copyright therein.
6.5 Assistance by Executive. During the period of Executives employment by the Company, Executive shall assist the Company and its nominee, at any time, in the protection of the Companys or its affiliates worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee(s) and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries. For the period of two (2) years after Executives employment termination with the Company pursuant to Section 5.3 above, at the request from time to time and expense of the Company or its affiliates, Executive shall assist the Company or its nominee(s) in the protection of the Companys or its affiliates worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries. Executive shall assist after Executives employment termination with the Company other than pursuant to Section 5.3 above pursuant to mutually agreeable terms between the Executive and the Company.
6.6 Remedies. Executive acknowledges that money damages would not be a sufficient remedy for any breach of this Article VI by Executive, and the Company or its affiliates shall be entitled to enforce the provisions of this Article VI by terminating payments or benefits then owing to Executive under Section 5.3and to specific performance and injunctive relief as remedies for such breach or any threatened breach; provided, that, to the extent the Company receives monetary damages from the Executive, such amounts shall not exceed the total value Executive received under Section 5.3. Such remedies shall not be deemed the exclusive remedies for a breach of this Article VI but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Executive and Executives agents. However, if it is determined that Executive has not committed a breach of this Article VI, then the Company shall resume the payments and benefits due under this Agreement and pay to Executive and Executives spouse, if applicable, all payments and benefits that had been suspended pending such determination.
ARTICLE VII
STATEMENTS CONCERNING THE COMPANY
7.1 Statements Concerning the Company. Executive shall refrain, both during and after the termination of the employment relationship, from publishing any oral or written statements about the Company, any of its affiliates or any of the Companys or such affiliates directors, officers, employees, consultants, agents or representatives that (a) are slanderous, libelous or defamatory, (b) disclose Confidential Information of the Company, any of its affiliates or any of the Companys or any such affiliates business affairs, directors, officers, employees, consultants, agents or representatives, or (c) place the Company, any of its affiliates, or any of the Companys or any such affiliates directors, officers, employees, consultants, agents or representatives in a false light before the public. The Company agrees that the members of the Board and the Companys named executive officers, while serving in such capacity for the Company, shall not make negative comments about the Executive or otherwise disparage the
Executive in any manner that is likely to be harmful to the Executives business reputation. The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings), and the foregoing limitation on the Companys executives and directors shall not be violated by statements that they in good faith believe are necessary or appropriate to make in connection with performing their duties and obligations to the Company. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded the Company and its affiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law.
7.2 Enforcement Rights. A violation or threatened violation of this Article VII may be enjoined by the courts. The rights afforded the Company and its affiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law.
ARTICLE VIII
NON-COMPETITION AGREEMENT
8.1 Definitions. As used in this Article VIII, the following terms shall have the following meanings:
Business means (a) during the period of Executives employment by the Company, the core products and services provided by the Company and its affiliates during such period and other products and services that are functionally equivalent to the foregoing, and (b) during the portion of the Prohibited Period that begins on the termination of Executives employment with the Employer, the products and services provided by the Company and its affiliates at the time of such termination of employment and other products and services that are functionally equivalent to the foregoing.
Competing Business means any business, individual, partnership, firm, corporation or other entity which wholly or in any significant part engages in any business competing with the Business in the Restricted Area. In no event will the Company or any of its affiliates be deemed a Competing Business.
Governmental Authority means any governmental, quasi-governmental, state, county, city or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof.
Legal Requirement means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization, or other directional requirement (including, without limitation, any of the foregoing that relates to environmental standards or controls, energy regulations and occupational, safety and health standards or controls including those arising under environmental laws) of any Governmental Authority.
Prohibited Period means the period during which Executive is employed by the Employer hereunder and a period of two years following the termination of Executives employment with the Employer.
Restricted Area means any geographic area within a 100-mile radius of any location where the Company or its affiliates engages in the Business, and for which Executive has or had responsibilities, during the period of Executives employment.
8.2 Non-Competition; Non-Solicitation. Executive and Extractionagree to the non-competition and non-solicitation provisions of this Article VIII in consideration for the Confidential Information provided by Extractoin to Executive pursuant to Article VI of this Agreement, to protect the trade secrets and confidential information of the Company or its affiliates disclosed or entrusted to Executive by the Company or its affiliates or created or developed by Executive for the Company or its affiliates, to protect the business goodwill of the Company or its affiliates developed through the efforts of Executive and/or the business opportunities disclosed or entrusted to Executive by the Company or its affiliates and as an additional incentive for Extraction to enter into this Agreement.
(a) Subject to the exceptions set forth in Section 8.2(b) below, Executive expressly covenants and agrees that during the Prohibited Period (i) Executive will refrain from carrying on or engaging in, directly or indirectly, any Competing Business in the Restricted Area and (ii) Executive will not, and Executive will cause Executives affiliates not to, directly or indirectly, own, manage, operate, join, become an employee of, partner in, owner or member of (or an independent contractor to), control or participate in, be connected with or loan money to, sell or lease equipment or property to, or otherwise be affiliated with any business, individual, partnership, firm, corporation or other entity which engages in a Competing Business in the Restricted Area.
(b) Notwithstanding the restrictions contained in Section 8.2(a), Executive or any of Executives affiliates may own an aggregate of not more than 2% of the outstanding stock of any class of any corporation engaged in a Competing Business, if such stock is listed on a national securities exchange or regularly traded in the over-the-counter market by a member of a national securities exchange, without violating the provisions of Section 8.2(a), provided that neither Executive nor any of Executives affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation.
(c) Executive further expressly covenants and agrees that during the Prohibited Period, Executive will not, and Executive will cause Executives affiliates not to (i) engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of the Company or any of its affiliates or (ii) canvass, solicit, approach or entice away or cause to be canvassed, solicited, approached or enticed away from the Company or any of its affiliates any person who or which is a customer of any of such entities during the period during which Executive is employed by the Employer.
(d) The restrictions contained in Section 8.2 shall not apply to any product or service that the Company or the Employer provided during Executives employment but that the Company or the Employer no longer provides at the Date of Termination.
(e) Before accepting employment with any other person or entity while employed by the Employer during the Prohibited Period, the Executive will inform such person or entity of the restrictions contained in this Article VIII.
8.3 Relief. Executive and Extraction agree and acknowledge that the limitations as to time, geographical area and scope of activity to be restrained as set forth in Section 8.2 are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of Extraction. Executive and Extraction also acknowledge that money damages would not be sufficient remedy for any breach of this Article VIII by Executive, and the Company or its affiliates shall be entitled to enforce the provisions of this Article VIII by terminating payments or benefits then owing to Executive under Section 5.3 and to specific performance and injunctive relief as remedies for such breach or any threatened breach; provided, that, to the extent the Company or the Employer receives monetary damages from the Executive, such amounts shall not exceed the total value Executive received under Section 5.3. Such remedies shall not be deemed the exclusive remedies for a breach of this Article VIII but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Executive and Executives agents. However, if it is determined that Executive has not committed a breach of this Article VIII, then Extraction shall resume the payments and benefits due under this Agreement and pay to Executive all payments and benefits that had been suspended pending such determination.
8.4 Reasonableness; Enforcement. Executive hereby represents to Extraction that Executive has read and understands, and agrees to be bound by, the terms of this Article VIII. Executive acknowledges that the geographic scope and duration of the covenants contained in this Article VIII are the result of arms-length bargaining and are fair and reasonable in light of (a) the nature and wide geographic scope of the operations of the Business, (b) Executives level of control over and contact with the Business in all jurisdictions in which it is conducted, (c) the fact that the Business is conducted throughout the Restricted Area and (d)the amount of Confidential Information that Executive is receiving in connection with the performance of Executives duties hereunder. It is the desire and intent of the parties that the provisions of this Article VIII be enforced to the fullest extent permitted under applicable Legal Requirements, whether now or hereafter in effect and therefore, to the extent permitted by applicable Legal Requirements, Executive and Extraction hereby waive any provision of applicable Legal Requirements that would render any provision of this Article VIII invalid or unenforceable.
8.5 Reformation. Extraction and Executive agree that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Article VIII would cause irreparable injury to Extraction. Executive understands that the foregoing restrictions may limit Executives ability to engage in certain businesses anywhere in the Restricted Area during the Prohibited Period, but acknowledges that Executive will receive sufficient consideration from Extraction to justify such restriction. Further, Executive acknowledges that Executives skills are such that Executive can be gainfully employed in non-competitive employment, and that the agreement not to compete will not prevent Executive from earning a living. Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified,
to be fully enforced. By agreeing to this contractual modification prospectively at this time, Extraction and Executive intend to make this provision enforceable under the law or laws of all applicable States, Provinces and other jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal. Such modification shall not affect the payments made to Executive under this Agreement.
ARTICLE IX
DISPUTE RESOLUTION
9.1 Arbitration. Except as otherwise provided in this Article IX, any and all claims or disputes between Executive and the Company or its parents, subsidiaries and affiliates (including, without limitation, the validity, scope, and enforceability of this Article IX and claims arising under any federal, state or local law prohibiting discrimination in employment or governing the employment relationship in any way) shall be submitted for final and binding arbitration by a single arbitrator in Denver, Colorado, in accordance with the rules for resolution of employment disputes of the American Arbitration Association (AAA). The arbitrator shall have the power to gather such materials, information, testimony, and evidence as he or she deems relevant to the dispute before him or her, and each party will provide such materials, information, testimony, and evidence requested by the arbitrator, except to the extent any information so requested is subject to an attorney-client or other privilege. The arbitrator shall apply the substantive law of the State of Colorado (excluding Colorado choice-of-law principles that might call for the application of some other states law), or federal law, or both as applicable to the claims asserted. The results of the arbitration and the decision of the arbitrator will be final and binding on the parties and each party agrees and acknowledges that these results shall be enforceable in a court of law of competent jurisdiction; provided that the parties agree that the arbitrator and any court enforcing the award of the arbitrator shall not have the right or authority to award punitive or exemplary damages to any disputing party. No demand for arbitration may be made after the date when the institution of legal or equitable proceedings based on such claim or dispute would be barred by the applicable statute of limitations. In the event either party must resort to the judicial process to enforce the provisions of this Agreement, the award of an arbitrator, or equitable relief granted by an arbitrator, the party seeking enforcement shall be entitled to recover from the other party all costs of litigation including, but not limited to, reasonable attorneys fees and court costs. All proceedings conducted pursuant to this agreement to arbitrate, including any order, decision or award of the arbitrator, shall be kept confidential by all parties. Executive and Extraction explicitly recognize that no provision of this Article IX shall prevent either party from seeking to resolve any dispute relating to Article VI or Article VIII of this Agreement in a court of law. Executive and Extraction further acknowledge and agree that a court of competent jurisdiction shall have the power to maintain the status quo pending the arbitration of any dispute under this Article IX, and this Article IX shall not require the arbitration of an application for emergency or temporary injunctive relief by either party pending arbitration; provided, however, that the remainder of any such dispute beyond the application for emergency or temporary injunctive relief shall be subject to arbitration under this Article IX. EXECUTIVE ACKNOWLEDGES THAT, BY SIGNING THIS AGREEMENT, EXECUTIVE IS WAIVING ANY RIGHT THAT EXECUTIVE MAY HAVE TO A JURY TRIAL OR, EXCEPT AS EXPRESSLY PROVIDED HEREIN, A COURT TRIAL OF ANY CLAIM ALLEGED BY EXECUTIVE.
ARTICLE X
CERTAIN EXCISE TAXES
Notwithstanding anything to the contrary in this Agreement, if Executive is a disqualified individual (as defined in section 280G(c) of the Code), and the payments and benefits provided for in this Agreement, together with any other payments and benefits which Executive has the right to receive from the Company or any of its affiliates, would constitute a parachute payment (as defined in section 280G(b)(2) of the Code), then the payments and benefits provided for in this Agreement shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive from the Company and its affiliates will be one dollar ($1.00) less than three times Executives base amount (as defined in section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Executive shall be subject to the excise tax imposed by section 4999 of the Code, or (b) paid in full, whichever produces the better net after-tax position to Executive (taking into account any applicable excise tax under section 4999 of the Code and any other applicable taxes, including any federal, state, municipal, and local income or employment taxes, and taking into account the phase out of itemized deductions and personal exemptions). The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then, reducing any benefit to be provided in-kind hereunder in a similar order, in all instances in accordance with Section 409A. The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by the Company or the Employer in good faith; provided, however, that (a) no portion of Executives payments or benefits the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a payment within the meaning of section 280G(b) of the Code will be taken into account; (b) no portion of Executives payments or benefits will be taken into account which, in the opinion of tax counsel (Tax Counsel) for the Company does not constitute a parachute payment (including by reason of section 280G(b)(4)(A) of the Code); (c) in calculating the applicable excise tax under section 4999 of the Code, no portion of Executives payments or benefits will be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of the base amount that is allocable to such reasonable compensation; and (d) the value of any non-cash benefit or any deferred payment or benefit will be determined by Tax Counsel or the Companys independent auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. At the time that payments are made under this Agreement, the Company will provide Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations, including any opinions or other advice the Company received from Tax Counsel, the Companys independent auditor, or other advisors or consultants (and any such opinions or advice which are in writing will be attached to the statement). If a reduced payment or benefit is made or provided, and through error or otherwise, that payment or benefit, when aggregated with other payments and benefits from the Company (or its affiliates) used in determining if a parachute payment exists, exceeds one dollar ($1.00) less than three times Executives base amount, then Executive shall immediately repay such excess to the Company or the applicable affiliate upon notification that an overpayment has been made. The fact that Executives right to
payments or benefits may be reduced by reason of the limitations contained in this Article X will not limit or otherwise affect any other rights of Executive under this Agreement or otherwise. All determinations required by this Article X will be made at the expense of the Company. However, nothing in this Article X shall require the Company or any affiliate to be responsible for, or have any liability or obligation with respect to, Executives excise tax liabilities under section 4999 of the Code.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (a) when received if delivered personally or by courier, (b) on the date receipt is acknowledged if delivered by certified mail, postage prepaid, return receipt requested or (c) one day after transmission if sent by facsimile transmission with confirmation of transmission, as follows:
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or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.
11.2 Applicable Law; Submission to Jurisdiction.
(a) This Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of Colorado, without regard to conflicts of laws principles thereof.
(b) With respect to any claim or dispute related to or arising under this Agreement, the parties hereto hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in the State of Colorado.
11.3 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this
Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
11.4 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.
11.5 Counterparts. 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 Agreement.
11.6 Withholding of Taxes and Other Employee Deductions. The Employer or the Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes and withholdings as may be required pursuant to any law or governmental regulation or ruling and all other customary deductions made with respect to the Companys employees generally.
11.7 Headings. The Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.
11.8 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.
11.9 Affiliate. As used in this Agreement, the term affiliate as used with respect to a particular person or entity shall mean any other person or entity which owns or controls, is owned or controlled by, or is under common ownership or control with, such particular person or entity.
11.10 Successors; Assigns; Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the Company and the Employer and any successor of the Company or the Employer. In addition, the Employer may assign this Agreement and Executives employment to any other affiliate of the Company at any time without the consent of Executive, and any assign of the Employer shall be deemed to be the Employer for purposes of this Agreement. Except as provided in the foregoing sentences of this Section 11.10, this Agreement and the rights and obligations of the parties hereunder are personal, and neither this Agreement nor any right, benefit, or obligation of either party hereto shall be subject to voluntary or involuntary assignment, alienation, or transfer, whether by operation of law or otherwise, without the prior written consent of the other party. In addition, any payment owed to Executive hereunder after the date of Executives death shall be paid to Executives estate. Each affiliate of the Company shall be a third party beneficiary of, and may directly enforce, Executives obligations under Article VI, Article VII and Article VIII.
11.11 Term. Termination of this Agreement shall not affect any right or obligation of any party which is accrued or vested prior to such termination. Without limiting the scope of the preceding sentence, the provisions of Articles V, VI, VII, VIII and IX shall survive any termination of the employment relationship and/or of this Agreement.
11.12 Entire Agreement. Except as provided in any signed written agreement contemporaneously or hereafter executed by the Company or the Employer and Executive, this Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by the Employer. Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution of this Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect.
11.13 Modification; Waiver. Any modification to or waiver of this Agreement will be effective only if it is in writing and signed by the parties to this Agreement.
11.14 Actions by the Board. Any and all determinations or other actions required of the Board hereunder that relate specifically to Executives employment by the Employer or the terms and conditions of such employment shall be made by the members of the Board other than Executive if Executive is a member of the Board, and Executive shall not have any right to vote or decide upon any such matter.
11.15 Executives Representations and Warranties. Executive represents and warrants to Extraction that (a) Executive does not have any agreements with any prior employers or other third parties that will prohibit Executive from working for Extraction or fulfilling Executives duties and obligations to Extraction pursuant to this Agreement and (b) Executive has complied with all duties imposed on Executive with respect to Executives former employer, e.g., Executive does not possess any tangible property belonging to Executives former employer.
11.16 Section 409A. The parties hereby agree that this Agreement is intended to satisfy the requirements of Section 409A with respect to amounts, if any, subject thereto and shall be interpreted, construed, and administered consistent with such intent. Each payment made under this Agreement shall be deemed to be a separate payment for purposes of Section 409A. Notwithstanding any provision in this Agreement to the contrary, if Executive is a specified employee (as such term is defined in Section 409A and as determined by the Employer in accordance with any method permitted under Section 409A) and any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if Executives receipt of such payment or benefit is not delayed until the Section 409A Payment Date, then such payment or benefit shall not be provided to Executive (or Executives estate, if applicable) until the Section 409A Payment Date. Notwithstanding anything to the contrary in this Agreement or elsewhere, any payment or benefit under this Agreement or otherwise that is exempt from Section 409A pursuant to Treasury Regulation § 1.409A-l(b)(9)(v)(A) or (C) (relating to certain reimbursements and in-kind benefits) shall be paid or provided only to the extent that the expenses are not incurred, or the benefits are not provided, beyond the last day of the second calendar year following the calendar year in which Executives separation from service occurs; and provided further that such expenses are reimbursed no later than the last day of the third calendar year following the calendar year in which Executives separation from service occurs. To the extent any expense reimbursement or the provision of any in-kind benefit is determined to be subject to Section 409A (and not exempt pursuant to the prior sentence or otherwise) (i) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit, (ii) the amount of any such expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (iii) such payments shall be made on or before the last day of Executives taxable year following the taxable year in which the expense occurred.
11.17 Clawback. Notwithstanding any provisions in this Agreement to the contrary, any compensation, payments, or benefits provided hereunder, whether in the form of cash or otherwise, shall be subject to a clawback to the extent necessary to comply with the requirements of any applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, section 304 of the Sarbanes Oxley Act of 2002, or any regulations promulgated thereunder, or any policy adopted by the Company pursuant to any such law (whether in existence as of the Effective Date or later adopted).
[Signatures begin on next page.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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EXTRACTION OIL & GAS, INC. | |
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/s/ Mark A. Erickson |
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Name:Mark A. Erickson |
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Title: Chief Executive Officer |
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XOG SERVICES, LLC | |
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By: |
/s/ Mark A. Erickson |
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Name: Mark A. Erickson |
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Title: Chief Executive Officer |
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RUSSELL T. KELLEY, JR. | |
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/s/ Russell T. Kelley, Jr. |
SIGNATURE PAGE TO
EMPLOYMENT AGREEMENT
RUSSELL T. KELLEY, JR.