THIMOTHY S. WAFFORD
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of ________, 2010
(the "Effective Date"), is made and entered into between Sun River Energy, Inc.
(the "Company") and Thimothy S. Wafford ("Executive").
RECITALS
WHEREAS, the Company desires to employ Executive and Executive desires
to serve in the employ of the Company pursuant to the terms of the Agreement;
WHEREAS, this Agreement is being entered into contemporaneously with
the closing of the transaction contemplated by the Purchase and Sale Agreement
(the "PSA") between FTP Oil and Gas LP ("FTP") as seller and the Company as
buyer attached hereto as Exhibit A, pursuant to which certain or all of the oil
and gas interests of FTP, which is wholly-owned by Executive and Thimothy S.
Wafford, have been acquired by the Company and this Agreement shall only become
effective upon the closing of the purchase and sales transaction contemplated by
the PSA;
WHEREAS, the Company and Executive desire to set forth in writing in
this Agreement the terms and conditions of their agreement and understandings
with respect to the employment of Executive.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Employment.
Position and Duties of Executive. During the Term (hereafter defined),
Executive shall be employed by the Company and shall serve as Chief Operating
Officer ("COO") of the Company. During the Term, COO will report directly to the
CEO and shall perform the following duties and be expressly responsible for: (1)
development and analysis of potential acquisitions and/or divestitures; (2)
implementation and oversight of exploration and/or development drilling
activities including, but not limited to engineering and geological matters; (3)
production, maintenance and operation of Company oil and gas assets including,
but not limited to, development and maintenance of reserves information on all
oil and gas assets; and (4) other such duties as may be assigned from time to
time by the CEO. To the extent necessary, the Board of Directors of the Company
(the "Board") shall take any additional actions required to grant Executive
day-to-day decisional authority as it relates to drilling, production,
maintenance and operation of its oil and gas assets.
Performance. During the Term, Executive shall faithfully, diligently and
to the best of his ability perform such duties as are determined by the Board of
the Company from time to time (which duties shall be consistent with his titles
and positions as set forth above) as limited by the Board, its committees and
internal controls and procedures and Sarbanes Oxley, and shall devote his full
business time, energy and best efforts to fulfill his duties. Executive may not
engage, directly or indirectly, in any other business, investment, or activity
that interferes with Executive's performance of Executive's duties hereunder, is
contrary to the interest of the Company or any of its subsidiaries, or requires
any significant portion of Executive's business time. To the extent not in
conflict with the preceding sentence, Executive shall be permitted to (i)
continue his current investing and related business activities with other than
with Competing Businesses (hereafter defined), (ii) make investments in other
than Competing Businesses, (iii) engage in charitable, nonprofit, civic, board,
consulting or community activities for which Executive receives no compensation
or other pecuniary advantage unless otherwise approved by the Board and (iv)
engage in such other activities that are approved in advance by the Board. For
purposes of this Agreement, "Competing Business" means any individual, business,
firm, company, partnership, joint venture, organization, or other entity that is
primarily involved in the business of leasing, acquiring, exploring, producing,
gathering, transporting, storing or marketing of hydrocarbons and related
products and the exploration potential of geographical areas on which
hydrocarbon exploration prospects are located or otherwise competes with or is
engaged in a similar busineses to that of the Company during the Term in the
Restricted Area and subject to section 6. For purposes of this Agreement, the
"Restricted Area" means anywhere within a 50 mile radius of any location in
which the Company has actual oil and gas properties during the Term the United
States.
Place of Work. During the Term, Executive shall primarily perform
services under this Agreement at the Company's headquarters, which shall be in
Dallas County, Texas. However, Executive understands that he may be required to
travel in connection with the performance of his duties.
2. Term. Subject to earlier termination as hereafter provided, Executive's
employment hereunder shall be for a term of three (3) years, subject to and
commencing on the Effective Date of the Purchase and Sale Transaction
contemplated by the PSA (the "Asset Sale"). Following the initial Term
Executive's employment shall be for additional one (1) year terms unless either
party to this Agreement notifies the other in writing at least ninety (90) days
prior to the end of the initial Term (hereafter defined) or at least ninety (90)
days prior the end of any one (1) year extension of Executive's employment. The
"Term" as used in this Agreement shall refer to the initial three (3) year term
and any one (1) year renewal terms as provided in this paragraph. If Executive
remains employed by the Company after the expiration of the Term, Executive
shall become an at-will employee and, except for Sections 6, 7, 8 and 9, the
terms of this Agreement shall not apply to such employment. Upon termination of
this Agreement Company shall pay to Executive only the wages earned by Executive
through Executive's last day of employment under this Agreement and any such
other amounts as provided in Section 5. Nonrenewal of the Term as provided in
this paragraph will not affect the Company's or Executive's other obligations
that expressly survive pursuant to the terms of this Agreement.
3. Compensation for Employment.
(a) First Year Compensation. In consideration for all services rendered
by Executive under this Agreement during the first year of the Term, the Company
shall not pay Executive any cash compensation but shall provide annual
compensation in the form of stock options ("Base Compensation") as follows: the
Company shall issue to Executive Stock Options ("Stock Options") exercisable
into one million (1,000,000) shares of Common Stock of the Company pursuant to
the terms of the 2010 Sun River Energy, Inc. Stock Option and Award Incentive
Plan, as amended (the "Stock Plan"). The Stock Options shall be issued to
Executive on the Effective Date and shall be earned and vest 1/36th each month
thereafter (each a "Vesting Date") during the Term. The exercise price of the
Stock Options shall equal the average fair market value of a share of the
Company's common stock on the Effective Date of the PSA is between the Parties.
Finally, the Company shall cause Common Stock obtained through the Stock Options
to be registered pursuant to the terms of the Stock Plan on Form S-8.
(b)Subsequent Year Compensation. In consideration for all services
rendered by Executive under this Agreement following the first year of the Term,
the Company shall begin to pay, in year Two and Three of the Term, Executive
cash compensation in an amount determined by the Board, in its sole discretion
("Cash Compensation"); provided that such amount shall not be less than
Three-Hundred Thousand Dollars ($300,000.00), starting at year 2 (less required
withholdings) without Executive's written consent. Cash Compensation shall be
earned and payable periodically in equal installments in accordance with the
Company's normal payroll practices beginning in year Two of the Term, including
applicable deductions and withholdings. Cash Compensation will be subject to
annual review pursuant to the Company's normal review policy for other similarly
situated executives of the Company and any changes in Cash Compensation will be
communicated in writing to Executive. Following the first year of this
Agreement, the term "Base Compensation" shall consist only of Cash Compensation,
including any annual adjustments pursuant to the terms of this Agreement.
(c) Bonus Plan. Executive shall be eligible to receive an annual bonus for
each year ending during the Term in cash, as shall be determined by the Board in
its sole discretion ("Bonus"). The Bonus shall be payable either pursuant to the
terms of a bonus plan adopted by the Board, or in the form of equity awards
granted in accordance with the terms of the Stock Plan, provided, however, that
the Bonus payable with respect to the period beginning May 1, 2010 and ending on
April 30, 2013 shall be payable in accordance with the terms and conditions set
forth in Exhibit C, attached hereto and incorporated herein. At the Board's sole
discretion, the cash bonus may be paid in an equivalent value of common stock as
of date of bonus. Any such payment, is not subject to any repurchase agreement
in place at the time of payment.
(d)Reimbursement of Expenses. The Company will advance, pay or reimburse
Executive, in accordance with the regular policies of the Company, for all
reasonable and business expenses incurred by Executive in furtherance of or in
connection with performing his obligations under this Agreement during the Term
and consistent with the Company's annual budget.
(e) Other Benefits. Executive is entitled to participate during the Term
in any group health insurance plan, long-term disability insurance plan, equity
or cash incentive compensation plan, 401(k) plan, and any other benefit or
welfare program or policy that is made available, from time to time, to other
executives of the Company, on a basis consistent with such participation and
subject to the terms of the plan documents, as such plans may be modified,
amended, terminated, or replaced from time to time.
(f) Fringe Benefits. During his employment pursuant to this Agreement, and
except as otherwise provided in this Agreement, Executive shall be entitled to
participate on substantially the same terms and conditions in the Company
sponsored fringe benefits generally provided to similarly situated personnel,
such as vacation and sick pay.
(g)Withholding. As a condition of the receipt of any payment or benefit
hereunder, the Company shall be entitled to withhold any federal, state or local
taxes, in the reasonable judgment of Company, required by law to be withheld.
4. Termination.
(a) Termination by Executive. Executive may terminate his employment
under this Agreement at any time for any of the following reasons; however, the
events in Sections 4(a)(i)-(iv) are only referred to as "Good Reason"):
(i) without Executive's prior written consent, there is a material
reduction in Executive's authority, duties or responsibilities with the Company
from that set forth in Section 1 except in the event of a merger;
(ii) the Company fails in a material way to fulfill its obligations under
Section 3;
(iii)the Company does not fulfill its obligations under Section 11 in
connection with a Change in Control; or
(iv) other than due to Executive's death or voluntary resignation by
Executive from the Board.
For purposes of the Good Reason events specified in Sections 4(a)(i)-(iv),
Executive shall only have Good Reason to terminate his employment if he has
provided to the Company a written notice describing what Executive believes is
Good Reason within ninety (90) days of such purported action (or failure to act)
of the Company and the Company has failed to cure such circumstance within
thirty (30) days of receipt of said notice from Executive. If Executive fails to
terminate his employment for Good Reason within sixty (60) days of the Company's
failure to timely cure such circumstance, then such circumstance shall not
constitute "Good Reason" for purposes of this Agreement.
(b) Termination by the Company. The Company shall have the right to
terminate Executive's employment under this Agreement at any time; however, the
following reasons (the events in Sections 5(b)(i)-(vii) only are referred to as
"Cause"):
(i) the Executive's death;
(ii) the Executive's Disability. For purposes of this
Agreement, "Disability" means a physical or mental infirmity which in the
judgment of the Board impairs the Employee's ability to substantially perform
his duties pursuant to this Agreement and which infirmity continues for a period
of at least 120 days in any 365 day period or for which Employee is receiving
long-term disability benefits;
(iii) the substantial and continued willful failure by Executive to
perform his duties hereunder, or a material breach or threatened breach of this
Agreement by Executive, in either case which results, or could reasonably be
expected to result, in material harm to the business or reputation of the
Company, which failure or breach is not corrected (if correctable) by Executive
within 30 days after written notice of such failure or breach is delivered to
Executive by the Company;
(iv) a serious breach of trust, including, but not limited to, theft,
embezzlement, self-dealing, prohibited disclosure to unauthorized persons or
entities of confidential or proprietary information of or relating to the
Company or the engaging by Employee in any prohibited business which is
competitive with the business of the Company and its subsidiaries, affiliates or
associated entities. Termination under this subsection requires a uniamous vote
of Board with Executive abstaining and to the extent Donal R. Schmidt, Jr. is a
director, his abstaining;
(v) a violation of the Company's code of business conduct or
equivalent code of policy, or Board Policies or restrictions or directions which
violation is not corrected (if correctable) by Executive within 30 days after
written notice of such violation is delivered to Executive by the Company;
(vi) the commission by Executive of any criminal act involving
moral turpitude or a felony which results in a conviction;
(vii) failure to maintain current SEC Reporting as required by SEC
Rules and Regulations that is directly attributable to the actions of the
Executive.
(c) Notice of Termination. Any termination of Executive's employment by
the Company or by Executive, other than termination as a result of Executive's
death, shall be communicated by written notice of termination to the other party
hereto in accordance with Section 13, which notice shall indicate the specific
termination provision in this Agreement relied upon, the effective date of
termination of Executive's employment and set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated. If Executive elects to
terminate his employment for Good Reason, Executive must first provide notice of
the existence of a Good Reason event, and the Company shall have the opportunity
to remedy such Good Reason event in accordance with Section 4(a).
5. Obligations Upon Termination.
(a) The Company's Obligations to Executive Upon Termination by
Executive for Good Reason or Upon Termination by the Company for Other Than
Cause. In the event Executive terminates his employment with Good Reason or the
Company terminates Executive for other than Cause, the Company shall have no
further liability or obligation to Executive under this Agreement or in
connection with his employment hereunder, except for (i) any unpaid Base
Compensation accrued through the date of termination; (ii) any unreimbursed
expenses properly incurred prior to the date of termination, (iii) any awards
previously granted pursuant to the Stock Plan that have fully vested and, if
applicable, exercisable, on the date of such termination of employment, (iv) any
amounts or rights to which Executive is entitled under any other written
agreements with the Company or written Company policy or pursuant to any Company
benefit or welfare plans in effect on the date of termination, and (v) in year
two, one lump-sum payment of severance pay equal to two (2) times the Base
Compensation (at the rate then in effect at the time of such termination) and
(vi) beginning in year three and any subsequent year in which this contract is
in effect, one lump-sum payment of severance pay equal to two (2) times the
annualized Base Compensation Rate (at the rate then in effect at the time of
such termination) for the remainder of the Term. Payments under clauses (i) and
(ii) shall be paid to Executive by the Company within ten (10) days after the
date of the termination of Executive's employment. Payments under clauses (iii)
and (iv) shall be paid to Executive by the Company pursuant to the terms of the
applicable agreements or plans. Payments under clause (v) shall be paid to
Executive by the Company within thirty (30) days after the date of termination
of Executive's employment. Each payment made in accordance with this Section
6(a) shall be treated as a separate payment for purposes of Section 409A of the
Code, to the extent Section 409A of the Code applies to such payments. In
addition, in the event (i) the Company terminates the Executive's employment
under this agreement other than For Cause or (ii) the Executive terminates his
employment under this Agreement for Good Reason within one year of a Change of
Control, all of the Stock Options Executive shall vest as of the date of such
termination.
(b) Termination by Executive without Good Reason or Termination by the
Company for Cause. In the event that Executive terminates his employment without
Good Reason or the Company terminates Executive for Cause, all future
compensation and benefits to which Executive is otherwise entitled under this
Agreement shall cease and terminate as of the date of termination and the
Company shall have no further liability or obligation to Executive under this
Agreement or in connection with his employment hereunder, except for (i) any
unpaid Base Compensation accrued through the date of termination, (ii) any
unreimbursed expenses properly incurred prior to the date of termination, and
(iii) any amounts or rights to which Executive is entitled under any other
written agreements with the Company or written Company policy or pursuant to any
Company benefit or welfare plans in effect on the date of termination. Payments
under clauses (i) and (ii) shall be paid to Executive by the Company within ten
(10) days after the date of termination of Executive's employment. Payments and
benefits under clause (iii) shall be paid to Executive pursuant to the
provisions of the applicable agreements or plans.
(c) Benefits after Termination. Upon any termination of Executive's
employment, Executive (and his eligible dependents) shall be entitled to
continuation of all group medical, dental and other health benefits that were
being provided to Executive (and his eligible dependents) immediately prior to
his termination of employment in accordance with the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and the terms of the Company's
benefit plans, as such may be amended from time to time. In the event Executive
elects COBRA continuation coverage for Executive and/or his eligible dependents
and Executive's terminated his employment under Section I) above or the Company
terminated his employment under SectiI4(c) above, the Company will pay the
entire cost of the COBRA premiums for such continuation coverage until the
earlier of (i) the date twelve (12) months after Executive's termination of
employment or (ii) the date that Executive or any qualified beneficiary (as
defined in COBRA) ceases to be eligible for COBRA continuation coverage under a
Company plan for any reason other than failure to pay premiums; provided
however, if coverage of Executive (and his eligible dependents) is not permitted
by such plans for any portion of such twelve (12) month period, then, for such
period when coverage is not permitted, the Company agrees to reimburse Executive
for the premium costs for individual medical and dental insurance coverage for
Executive (and his eligible dependents) pursuant to a policy providing similar
benefits as Executive (and his eligible dependents) were receiving under the
Company's plans on the date such coverage was no longer permitted.
Notwithstanding the foregoing, the Company reserves the right to amend, modify
or terminate its benefit plans at any time in a manner that affects employees of
the Company generally. To the extent any such benefits are otherwise taxable to
Executive, such benefits shall, for purposes of Section 409A of the Code and the
regulations and other guidance issued thereunder, be provided as separate
monthly in-kind payments of those benefits, and to the extent those benefits are
subject to and not otherwise excepted from Section 409A of the Code, the
provision of in-kind benefits during one calendar year shall not affect the
in-kind benefits to be provided in any other calendar year;
(d) Resignation from Board and Officership. Upon the termination of this
Agreement or Executive's employment for any reason, if Executive serves on the
Board of the Company or any affiliate of the Company, or holds a position as an
officer or committee member of the Company or an officer or committee member of
any affiliate of the Company, at the time of such termination, Executive shall
promptly resign from all such positions by delivery of written notice to such
effect, and if he does not provide such written notice, shall be deemed to have
resigned from all such positions at the time of such termination.
(e) Section 409A of the Code Compliance. The parties intend this
Agreement, and any payments made pursuant to this Article 6, to comply with the
requirements of Section 409A of the Code, and shall interpret this Agreement
consistently with such intent. To the extent (i) any payments to which Executive
becomes entitled under this Agreement, or any agreement or plan referenced
herein, in connection with Executive's termination of employment with the
Company constitutes deferred compensation subject to Section 409A of the Code,
and (ii) executive is deemed at the time of such termination of employment to be
a "specified employee" under Section 409A of the Code, then such payment or
payments shall not be made or commence until the earlier of (x) the expiration
of the six (6) month period measured from the date of Executive's "separation
from service" (as such term is defined in the Treasury Regulations issued under
Section 409A of the Code) with the Company; and (y) the date of
Executive's death following such separation from service. Any such delayed
amounts will be paid to Executive in a single lump sum, with interest from the
date otherwise payable at the prime rate as published in The Wall Street Journal
on the date of Executive's termination of employment with the Company.
(f) Change of Control. For purposes of this Agreement, the term "Change
of Control" shall have the same meaning as in the Stock Plan. Notwithstanding
the foregoing provisions of a "Change in Control," in the event any compensation
or benefit provided to the Executive as a result of a Change in Control is
subject to Section 409A of the Internal Revenue Code of 1986, as amended (the
"Code"), then, in lieu of the foregoing definition and to the extent necessary
to comply with the requirements of Section 409A of the Code, the definition of
"Change in Control" for purposes of such Award shall be the definition provided
by Section 409A of the Code.
6. Corporate Opportunities. Except as otherwise provided in this Agreement,
during the Term, if any business opportunities related to the business of the
Company are rejected by the Board after proper presentation thereof by Executive
to the Board, Executive shall be free to pursue such opportunity for his own
account or to present such opportunity to third parties, so long as such
opportunity is on terms and conditions no more favorable to him or such third
parties as he presents it to than those originally presented to the Board.
Except as otherwise provided in this Agreement, if, during the Term, any
business opportunities related to the business of the Company are not initially
presented to the Board, Executive shall not pursue such opportunity for his own
account or present such opportunity to third parties.
7. Nondisclosure and Non-Interference.
(a) Confidential Information" means any information, knowledge or data
of any nature and in any form (including information that is electronically
transmitted or stored on any form of magnetic or electronic storage media)
relating to the past, current or prospective business or operations of the
Company and its subsidiaries, that at the time or times concerned is not
generally known to persons engaged in businesses similar to those conducted or
contemplated by the Company and its subsidiaries (other than information known
by such persons through a violation of an obligation of confidentiality to the
Company), whether produced by the Company and its subsidiaries or any of their
consultants, agents or independent contractors or by Executive, and whether or
not marked confidential, including, without limitation, information relating to
the Company's or its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service research and development
methods or techniques, training methods and other operational methods or
techniques, quality assurance procedures or standards, operating procedures,
files, plans, specifications, proposals, drawings, charts, graphs, support data,
trade secrets, supplier lists, supplier information, purchasing methods or
practices, distribution and selling activities, consultants' reports, marketing
and engineering or other technical studies, maintenance records, employment or
personnel data, marketing data, strategies or techniques, financial reports,
budgets, projections, cost analyses, price lists and analyses, employee lists,
customer lists, customer source lists, proprietary computer software, and
internal notes and memoranda relating to any of the foregoing.
(b) Nondisclosure of Confidential Information. Executive shall hold in
a fiduciary capacity for the benefit of the Company all Confidential Information
which shall have been obtained by Executive during Executive's employment by the
Company and shall use such Confidential Information solely within the scope of
his employment with and for the exclusive benefit of the Company. At the end of
the employment term, Executive agrees (i) not to communicate, divulge or make
available to any person or entity (other than the Company) any such Confidential
Information, except upon the prior written authorization of the Company or as
may be required by law or legal process, and (ii) to deliver promptly to the
Company any Confidential Information in his possession, including any duplicates
thereof and any notes or other records Executive has prepared with respect
thereto. In the event that the provisions of any applicable law or the order of
any court would require Executive to disclose or otherwise make available any
Confidential Information then Executive shall give the Company prompt prior
written notice of such required disclosure and an opportunity to contest the
requirement of such disclosure or apply for a protective order with respect to
such Confidential Information by appropriate proceedings.
(c) Non-Interference. Executive shall not solicit, induce, influence or
attempt to influence any supplier, lessor, licensor, or any other person who has
a business relationship with the Company or its subsidiaries, or who on the date
of termination of Executive's employment hereunder is engaged in discussions or
negotiations to enter into a business relationship with the Company or its
subsidiaries, to discontinue or reduce the extent of such relationship with the
Company or its subsidiaries. Executive shall not make contact with any of the
employees of the Company or its subsidiaries with whom he had contact during the
course of his employment with the Company for the purpose of soliciting such
employee for hire, whether as an employee or independent contractor, or
otherwise disrupting such employee's relationship with the Company or its
subsidiaries. Executive further agrees that during the Term and for a period of
one year thereafter, Executive shall not hire any employee of the Company as an
employee or independent contractor, whether or not such engagement is solicited
by Executive.
8. Protection of Information.
(a) The Company shall disclose to Executive, or place Executive in a
position to have access to or develop, trade secrets or confidential information
of the Company; and/or shall entrust Executive with business opportunities of
the Company; and/or shall place Executive in a position to develop business good
will on behalf of the Company.
(b) Executive further agrees that during the Term and for a period of
one year thereafter, Executive shall not disclose or utilize, for Executive's
personal benefit or for the direct or indirect benefit of any other person or
entity, or for any other reason, whether for consideration or otherwise, during
the Term or at any time thereafter, any information, ideas, concepts,
improvements, discoveries which are conceived, made, developed, or acquired by
Executive, individually or in conjunction with others, during Executive's
employment by the Company (whether during business hours or otherwise and
whether on the Company's premises or otherwise) which relate to the business,
products, or services of the Company (including, without
limitation, all such business ideas, prospects, proposals or other opportunities
which are developed by Executive during his employment hereunder, or originated
by any third party and brought to the attention of Executive during his
employment hereunder, together with information relating thereto (including,
without limitation, data, memoranda, opinions or other written, electronic or
charted means, or any other trade secrets or other confidential or proprietary
information of or concerning the Company)) (collectively, "Business
Information"), except those subject to Section 6. Moreover, all documents,
drawings, notes, files, data, records, correspondence, manuals, models,
specifications, computer programs, E-mail, voice mail, electronic databases,
maps, and all other writings or materials of any type embodying any such
Business Information created during Executive's employment are and shall be the
sole and exclusive property of the Company. Upon termination of Executive's
employment by the Company, for any reason, Executive promptly shall deliver all
Business Information, and all copies thereof, to the Company. As a result of
knowledge of confidential Business Information of third parties, such as
customers, suppliers, partners, joint ventures, and the like, of the Company,
Executive also agrees to preserve and protect the confidentiality of such third
party Business Information to the same extent, and on the same basis, as the
Company's Business Information.
(c) Upon termination of this Agreement for any reason, Executive shall
promptly return to the Company all of the property of the Company, including,
without limitation, automobiles, equipment, computers, fax machines, portable
telephones, printers, software, credit cards, manuals, customer lists, financial
data, letters, notes, notebooks, reports and copies of any of the above and any
Confidential Information and Business Information that is in the possession or
under the control of Executive, regardless of the form in which it is held or
maintained.
9. Injunctive Relief. Executive acknowledges that a breach by Executive of any
provision of Section 7 and Section 8 would cause immediate and irreparable harm
to the Company for which an adequate monetary remedy does not exist; hence,
Executive agrees that, in the event of a breach or threatened breach by
Executive of the provisions of Section 7 and Section 8 during or after the
employment term, the Company shall be entitled to injunctive relief restraining
Executive from violation of any such Section without the necessity of proof of
actual damage, except as required by non-waivable, applicable law. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedy at law or in equity to which the Company may be entitled under applicable
law in the event of a breach or threatened breach of this Agreement by Executive
including, but not limited to, enforcing any obligations of Executive to Company
under any option, restricted stock or other agreement with the Company, recovery
of costs and expenses such as reasonable attorney's fees incurred by reason of
any such breach and actual damages sustained by the Company as a result of any
such breach.
10. Severability. Should a court determine that any paragraph or sentence, or
any portion of a paragraph or sentence of this Agreement, is invalid,
unenforceable, or void, this determination shall not have the effect of
invalidating or validating the remainder of the paragraph, sentence or any other
provision of this Agreement. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.
11. Successors. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs and successors, and the Company
agrees that in the event of a Change in Control, the Company shall take all
actions necessary so that the surviving entity in the Change in Control assumes
this Agreements, and the obligations and duties of the Company under this
Agreement. Except pursuant to the immediately preceding sentence, the rights and
obligations of the Company pursuant to this Agreement may not be assigned, in
whole or in part, by the Company to any other person or entity without the
express written consent of Executive. This Agreement is personal to Executive
and may not be assigned or delegated by him, and any such purported assignment
or delegation shall be null and void.
12. No Waiver. The failure of either party to insist in any one or more
instances upon performance of any terms or conditions of this Agreement shall
not be construed as a waiver of future performance of any such term, covenant or
condition but the obligations of either party with respect thereto shall
continue in full force and effect.
13. Notices. Any notice given hereunder shall be in writing and be delivered
either by personal delivery, by telecopy or similar facsimile means, by
certified or registered mail (postage prepaid and return receipt requested), or
by express courier or delivery service, addressed to the applicable party hereto
as the following address:
(a) To the Company: Sun River Energy, Inc.
Attn: Vince D'Antonio
305 South Andrews Avenue
Suite 204
Fort Lauderdale, FL 33301
Telecopy No.: (954) 463-4554
With copies to: *
(b) To Executive: Thimothy S. Wafford
5950 Berkshire Lane, Suite 1650
Dallas, TX 75225
Telecopy No.: 214-739-9192
With copies to: Haynes and Boone, LLP
2323 Victory Avenue, Suite 700
Dallas, Texas 75219-7673
Attn: W. Bruce Newsome
Telecopy No.: 214-200-0636
Or such other address and number as either party shall have previously
designated by written notice to the other party in the manner hereinafter set
forth. Notices shall be deemed given when received, if sent by telecopy or
similar facsimile means and received at or prior to 5:00 p.m. central time on a
business day in Dallas, TX or the next business day in Dallas, TX if received
after 5:00 p.m. central time on a business day in Dallas, TX or if received on
any other day (confirmation of such receipt by confirmed facsimile transmission
being deemed receipt of communications sent by telecopy or other facsimile
means); and when delivered and receipted for if hand-delivered, sent by express
courier or delivery service, or sent by certified or registered mail.
14. Entire Agreement. There are no oral representations, understandings or
agreements with the Company or any of its officers, directors or representatives
covering the same subject matter as this Agreement except as set forth in the
PSA, the Stock Plan, Rights of First Refusal (as attached hereto) or the
agreement herein to register the Common Stock or any share under the Stock
Options. This Agreement supersedes all previous employment agreements between
Executive and the Company and, along with the PSA, the Stock Plan, and Rights of
First Refusal (as attached hereto) and the agreement herein to register the
Common Stock or any share under the Stock Options contains the final, complete
and exclusive understanding and agreement between the parties with respect to
the subject matter hereof and cannot be amended, modified or supplemented in any
respect except by subsequent written agreement entered into by both parties;
provided, however, that in the event the Company determines, in its sole
discretion, that an amendment, modification or supplement is necessary for
purposes of compliance with or exemption from the requirements of Section 409A
of Code (or any regulations or other guidance issued thereunder), and to avoid
the imposition of additional tax on Executive, Executive agrees not to
unreasonably withhold his consent to such amendment, modification or supplement
or to unreasonably condition his consent on the renegotiation by the Company of
any other provision of this Agreement. Nothing in this Agreement shall supersede
the terms of the PSA, the Stock Plan, Rights of First Refusal (as attached
hereto) or the agreement herein to register the Common Stock or any share under
the Stock Options.
15. Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement, and all
of which, when taken together, shall be deemed to constitute one and the same
Agreement. The exchange of copies of this Agreement and of signature pages by
facsimile transmission shall constitute effective execution and delivery of this
Agreement as to the parties and may be used in lieu of the original Agreement
for all purposes. Signatures of the parties transmitted by facsimile shall be
deemed to be their original signatures for any purpose whatsoever.
16. Captions. The captions herein are for the convenience of reference of
the parties and are not to be construed as part of the terms of this Agreement.
17. Applicable Law This Agreement shall be governed by and construed under the
internal laws of the State of Texas without regard to principles of conflict of
laws. Venue of any litigation arising from this Agreement shall be in the United
States District Court for the Northern District of Texas, Dallas Division or a
state district court of competent jurisdiction in Dallas County, Texas. The
Company and Executive consent to personal jurisdiction of the United States
District Court for the Northern District of Texas, Dallas Division or a state
district court of competent jurisdiction in Dallas County, Texas for any dispute
relating to or arising out of this Agreement, agree that the United States
District Court for the Northern District of Texas, Dallas Division or a state
district court of competent jurisdiction in Dallas County, Texas shall be deemed
to be a convenient forum and agree not to assert (by way or motion, as a defense
or otherwise) that such litigation has been brought in an inconvenient forum,
that the venue of such litigation is improper or that this Agreement or the
subject matter of this Agreement may not been enforced in or by such court.
18. Insurance and Indemnification. During the Term, the Company shall use its
commercially reasonable efforts to maintain one or more Director and Officer
("D&O") insurance policies, or riders thereto, that provide separate (not
jointly covering other officers and directors of the Company) insurance coverage
to Executive, with a policy period from the beginning of the Term and continuing
until the date that is six years after the date Executive's employment with the
Company terminates, insuring Executive for claims up to $10,000,000 (the
"Individual Policy"), or provide similar financial arrangements with the consent
of Executive, which consent shall not be unreasonably withheld, delayed or
conditioned. The Executive's indemnification rights under the articles of
incorporation and bylaws of the Company may not be reduced in any manner from
those rights in effect on the Effective Date.
19. Certain Further Payments by Executive. To the extent not prohibited by IRS
rules and regulations as amended:
(a) Tax Reimbursement Payment. In the event that any amount or benefit
paid or distributed to Executive pursuant to this Agreement, the Plan or the
Option Agreement, taken together with any amounts or benefits otherwise paid or
distributed to Executive by the Company or any affiliated company that are
treated as parachute payments under Section 280G of the Code (such payments,
collectively, the "Covered Payments"), are or become subject to the tax (the
"Excise Tax") imposed under Section 4999 of the Code or any similar tax that may
hereafter be imposed, the Company shall pay to Executive an additional amount
(the "Tax Reimbursement Payment"), such that the net amount retained by
Executive with respect to such Covered Payments, after deduction of any Excise
Tax on the Covered Payments and any Federal, state and local income tax and
Excise Tax on the Tax Reimbursement Payment provided for by this Section 19, but
before deduction for any Federal, state or local income or employment tax
withholding on such Covered Payments, shall be equal to one-half (1/2) of the
amount of the Covered Payments. The time for payment of the Tax Reimbursement
Payment is set forth in Section 19(e).
(b) Assumptions for Calculation. For purposes of determining whether
any of the Covered Payments will be subject to the Excise Tax and the
amount of such Excise Tax,
(i) such Covered Payments will be treated as "parachute payments" within the
meaning of Section 280G of the Code, and all "parachute payments" in excess of
the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be
treated as subject to the Excise Tax, unless, and except to the extent that, in
the good faith judgment of a public accounting firm appointed by the Company or
tax counsel selected by such accounting firm (the "Accountants"), the Company
has a reasonable basis to conclude that such Covered Payments (in whole or in
part) either do not constitute "parachute payments" or represent reasonable
compensation for personal services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code) in excess of the "base amount," or such
"parachute payments" are otherwise not subject to such Excise Tax; and
(ii) The value of any non-cash benefits or any deferred payment or benefit shall
be determined by the Accountants in accordance with the principles of Section
280G of the Code.
(c) Assumed Tax Rates. For purposes of determining the amount of the Tax
Reimbursement Payment, Executive shall be deemed to pay all taxes at the highest
applicable marginal rate of taxation with respect to Federal, state and local
income taxes for the calendar year in which the Tax Reimbursement Payment is to
be made (without regard to applicable deductions).
(d) Subsequent Adjustment. In the event that the Excise Tax is
subsequently determined by the Accountants or pursuant to any proceeding or
negotiations with the Internal Revenue Service to be less than the amount taken
into account hereunder in calculating the Tax Reimbursement Payment made,
Executive shall repay to the Company, at the time that the amount of such
reduction in the Excise Tax is finally determined, the portion of such prior Tax
Reimbursement Payment that would not have been paid if such Excise Tax had been
applied initially calculating such Tax Reimbursement Payment, plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. Notwithstanding the foregoing, in the event any portion of the Tax
Reimbursement Payment to be refunded to the Company has been paid to any
Federal, state or local tax authority, repayment thereof shall not be required
until actual refund or credit of such portion has been made to Executive, and
interest payable to the Company shall not exceed interest received or credited
to Executive by such tax authority for the period it held such portion.
Executive and Company shall mutually agree upon the course of action to be
pursued (and the method of allocating the expenses thereof) if Executive's good
faith claim for refund or credit is denied (in whole or in part); provided that
Executive shall remain responsible to repay the Company for any such unrefunded
Tax Reimbursement Payments to the extent Executive ultimately prevails in such
claim.
In the event that the Excise Tax is later determined by the Accountants or
pursuant to any proceeding or negotiations with the Internal Revenue Service to
exceed the amount taken into account hereunder at the time the Tax Reimbursement
Payment is made (including, but not limited to, by reason of any payment the
existence or amount of which cannot be determined at the time of the Tax
Reimbursement Payment), the Company shall make an additional Tax Reimbursement
Payment in respect of such excess (plus any interest or penalty payable with
respect to such excess) at the time that the amount of such excess is finally
determined.
(e) Timing of Payments. The Tax Reimbursement Payment (or portion thereof)
provided for in Section 19(a) above shall be paid to Executive on the day of the
payment of the Covered Payments; provided, however, that if the amount of such
Tax Reimbursement Payment (or portion thereof) cannot be finally determined on
or before the date on which payment is due, the Company shall pay to Executive
by such date an amount estimated in good faith by the Accountants to be the
minimum amount of such Tax Reimbursement Payment and shall pay the remainder of
such Tax Reimbursement Payment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined, but in no event later than forty-five (45) days after payment of the
related Covered Payment. In the event that the amount of the estimated Tax
Reimbursement Payment exceeds the amount subsequently determined to have been
due, subject to the provisions of Section 19(d), such excess shall be payable by
Executive to the Company on the fifth business day after written demand by the
Company for payment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code). Notwithstanding anything to the contrary contained
herein, in no event shall any payments be made pursuant to this Section 19(e)
after the end of Executive's taxable year next following Executive's taxable
year in which Executive remits any related taxes to the Internal Revenue
Service.
20. No Mitigation. Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
and the amount of any payment provided for in this Agreement shall not be
reduced by any compensation earned by Executive as the result of employment by
another employer after the date of termination of Executive's employment.
21. Attorney Fees and Other Costs.
The Parties agree that all reimbursements of attorney fees and other costs
pursuant to this Section 18 shall be done in a manner that either exempts such
payments from Section 409A of the Code, or, in the event exemption is not
available, complies with Section 409A of the Code.
22. Survival. Except as expressly provided herein, the termination of employment
of Executive and the termination of the Term shall cause a termination of this
Agreement.
23. Agreement Drafted Equally by the Parties. This Agreement shall be deemed
drafted equally by both the parties. Its language shall be construed as a whole
and according to its fair meaning. Any presumption or principle that the
language is to be construed against any party shall not apply.
24. Withholding. All amounts paid under this Agreement (including without
limitation Base Salary or severance pay) shall be paid less all applicable state
and federal tax withholdings and any other withholdings required by any
applicable jurisdiction.
25. References. References in this Agreement, to the Plan, PSA or the Option
Agreement shall also include any amendments to such plan or agreements.
* * * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
Sun River Energy, Inc.
a Colorado corporation
By: __________________________
Name: __________________________
Title: __________________________
Date: __________________________
--------------------------
Thimothy S. Wafford
Date: _____________________________
EXHIBIT A
FORM OF PURCHASE AND SALE AGREEMENT ("PSA")
EXHIBIT B
TERMS OF RIGHT OF FIRST REFUSAL ("RIGHTS OF FIRST REFUSAL")
1. First Refusal on Sale of Shares. If the Executive or a transferee or assignee
of Executive (the "Selling Shareholder") proposes to sell all or part of his
shares of common stock, the following provisions shall apply:
(a) Notice: The Selling Shareholder shall first give written
notice (the "Option Notice") to the Company, which notice shall
identify the prospective purchaser and shall set forth in reasonable
detail the terms and conditions upon which such sale is proposed to be
made, and shall be accompanied by copies of the bona fide offer and any
other information furnished to or by the prospective purchaser(s). Such
notice shall automatically grant to the Company an option to purchase
that portion of the Shares of the Selling Shareholder proposed to be
assigned or sold upon the same terms and conditions as contained in the
bona fide offer.
(b) Shares Covered by Option: The option granted herein to the
Company must be exercised by the Company as to the entire interest
being offered (the "Offered Shares"), unless the Selling Shareholder
consents to a sale or transfer of less than the entire interest.
(c) Exercise of Option: The Company, at its sole discretion,
may, within thirty (30) days after receipt of the Option Notice (the
"Option Period"), give written notice to the Selling Shareholder (the
"Acceptance Notice"), signed by the Company, that the Company elects to
exercise such option, evidencing its agreement to purchase the Offered
Shares.
(d) Closing of Sale: Closing on the sale of the Offered Shares
to the Company shall take place at the principal place of business of
the Company ten (10) days after the expiration of the Option Period or
at such other place and time as agreed to by the Selling Shareholder
and the Company.
(e) Failure to Exercise Option: If the option is not exercised
within the Option Period as to the Offered Shares, the Selling
Shareholder may sell or transfer the Offered Shares within thirty (30)
days thereafter to the prospective purchaser named in the Option Notice
at a price and on terms no more favorable than described in the Option
Notice.
(f) Subsequent Transfers: The Selling Shareholder shall not
otherwise sell or transfer the Offered Shares to any person after the
termination of said sixty (60) day period without again complying with
this Section.
(g) No Pledges: The Executive and each transferee or assignee
of the Executive further agrees and covenants not to pledge, lend,
hypothecate or otherwise grant any interest in the shares of the common
stock, without the prior written consent of the Company, in its sole
discretion. The Company shall be entitled to redeem the shares of
common stock at the purchase price thereof in the event of any breach
of this section.
Exhibit "C"
Page 2
EXHIBIT C
[Assuming this is not a Section 162(m) Plan under the Internal Revenue Code]
DESCRIPTION OF BONUS PLAN FOR 2011, 2012, AND 2013 FISCAL YEARS
For the Company's fiscal years ending April 30, 2011, April 30, 2012, and April
30, 2013, Executive shall be entitled to receive a bonus upon the achievement of
an increase in Billions of Cubic Feet Equivalent ("BCFE") of the Company as
compared to the prior fiscal year as described below, as approved by the Board,
subject to the terms set forth herein. The BCFE increase, if any, incurred from
fiscal year to fiscal year shall be calculated based upon the proved reserve
valuations reported by Company at the end of each fiscal year purusuant to the
Company's reporting requirements as a publically-traded company under the United
States Securities Laws, as currently administered by the Unites States
Securities & Exchange Comission; provided, however, that such reserve valuations
shall not include any reserves attributable to reserves acquired by Company
pursuant to the PSA. Any bonus payable for any fiscal year shall be pro-rated
based upon the number of days, if less than 365, that Executive is employed by
the Company during such fiscal year if the Executive is not employed by the
Company at the end of the fiscal year. Any bonus payable pursuant to this
Exhibit C shall be paid no later than 2 1/2 months following the close of the
fiscal year to which such bonus relates. Except as otherwise provided herein,
Executive must be employed on the last day of the applicable fiscal year in
order to be eligible to receive a bonus with respect to such fiscal year.
For each increase in BCFE of the Company from one fiscal year as compared to the
prior fiscal year, the Executive shall received $62,500 with the maximum annual
payment being $2,500,000.
By way of example, if Executive begins employment with the Company on May 1,
2010 and for the April 30, 2011 fiscal year, the Company achieves a 15.5 BCFE
net increase over the April 30, 2010 fiscal year end BCFE, then Executive would
be entitled to the following bonus for the fiscal year end April 30, 2011:
15.5 x $62,500 = $968,750
If instead for the April 30, 2011 fiscal year, the Company achieves a 40 BCFE
increase over the April 30, 2010 fiscal year end BCFE, then Executive would be
entitled to the following bonus for the fiscal year end April 30, 2011:
40 x $62,500 = $2,500,000
If, instead for the April 30, 2011 fiscal year, the Company achieves a 55 BCFE
increase over the April 30, 2010 fiscal year end BCFE, then Executive would be
entitled to the following bonus for the fiscal year end April 30, 2011:
55 x $62,500 = $3,437,500 which is the maximum of $2,500,000 so the Executive
would receive the maximum of $2,500,000
In the event Executive is terminated without Cause or he terminates his
employment for Good Reason in accordance with Section 4(c) of the Employment
Agreement, then Executive shall be entitled to a pro-rata bonus for the fiscal
year of termination, subject to the Company's achievement of the BCFE goals for
such year, and payable at the time such bonus would have been paid had executive
remained employed. For fiscal year ended April 30, 2011, for the purposes of
calculating this bonus, Executive will be deemed to have started work on May 1,
2010 even if the actual start date is later than that date. If there is not BCFE
increase with respect to such fiscal year, no bonus shall be payable to
Executive. By way of example, if Executive commences employment with the Company
on June 1, 2010, his employment will be deemed to have commenced on May 1, 2010
and if Executive terminates his employment for Good Reason on January 1, 2011,
and the Company achieves a 20 BCFE increase for the April 30, 2011 fiscal year
as compared to the April 30, 2010 fiscal year end BCFE, then Executive shall be
entitled to the following bonus:
20 x $62,500 x [245 days of actual employment/365 days] = $839,041