Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT

 

This Executive Employment and Severance Agreement (this “Agreement”) is entered
into by and between

RING ENERGY, INC., a Nevada corporation (“Ring” and, together with its
subsidiaries, the “Company”), and Paul D. McKinney (the “Executive”) and
effective as of October 1, 2020 (the “Effective Date”).

 

WHEREAS, the Company desires to employ the Executive in a key employee capacity
and expects that the Executive’s services will be valuable to the conduct of the
business of the Company; and

 

WHEREAS, Ring and Executive desire to specify the terms and conditions on which
the Executive will be employed on and after the Effective Date, and under which
the Executive will receive severance in the event the Executive separates from
service with the Company under circumstances described in the Agreement; and

 

NOW THEREFORE, for the consideration described above and other good and valuable
consideration, the parties, intending to be legally bound, agree as follows:

 

1.        Position and Duties.

 

1.1          Employment; Titles; Reporting.  The Company agrees to employ the
Executive and the Executive agrees to be employed with the Company, upon the
terms and subject to the conditions provided under this Agreement.  During the
Employment Term (as defined in Section 2), the Executive will serve the Company
as Chief Executive Officer and Chairman of the Board.  In such capacity, the
Executive will report to the Board of Directors and be subject to the direction
and control of the Board of Directors of the Company (including any committee
thereof, the “Board”) and will have such duties, responsibilities and
authorities as may be assigned to him by the Board from time to time and
otherwise consistent with such position in a publicly traded company comparable
to the Company which is engaged in natural gas and oil exploration, development,
acquisition and production.

 

1.2       Duties. During the Employment Term, the Executive will devote
substantially all of his full working time to the business and affairs of the
Company, will use his best efforts to promote the Company’s interests and will
perform his duties and responsibilities faithfully, diligently and to the best
of his ability, consistent with sound business practices. The Executive may be
required by the Board to provide services to, or otherwise serve as an officer
or director of, any direct or indirect subsidiary of the Company. The Executive
will comply with the Company’s policies, codes and procedures, as they may be in
effect from time to time, applicable to executive officers of the Company.
Subject to the preceding sentence, the Executive may engage in other business
and charitable activities, provided that such charitable and/or other business
activities do not violate Section 7, create a conflict of interest or the
appearance of a conflict of interest with the Company, or materially interfere
with the performance of his duties and/or obligations to the Company under this
Agreement.

 

2.        Term of Employment.

 

The term of the Executive’s employment by the Company under this Agreement (the
“Employment Term”) commenced on the Effective Date and will continue until
employment is terminated by either party under Section 5. The date upon which
the Executive’s employment ends is referred to in this Agreement as the
“Termination Date.” For the purpose of Sections 5 and 6 of this Agreement, the
Termination Date shall be the date upon which the Executive incurs a “separation
from service” as defined in Section 409A of the Internal Revenue Code of 1986,
as amended (the “Code”), and regulations issued thereunder.

 

3.        Compensation.

 

3.1       Base Salary. During the Employment Term, the Executive will be
entitled to receive a minimum base salary (“Base Salary”) at an annual rate of
$480,000.00 for services rendered to the Company and any of its direct or
indirect subsidiaries, payable in accordance with the Company’s regular payroll
practices. The Executive’s Base Salary will be reviewed annually by the Board
and may be adjusted upward in the Board’s sole discretion, but not downward.

 

 

 

 

3.2       Annual Bonus Compensation. For each calendar year during the
Employment Term, beginning in 2021, the Executive will be eligible to
participate in an annual incentive compensation plan of the Company, as
established by the Board from time to time. The Executive’s target annual bonus
under this Agreement will be equal to a percentage of his Base Salary
established by the Board annually (the “Target Bonus”), to be in effect at the
beginning of the applicable calendar year. Executive’s actual annual bonus will
be determined based upon the achievement of certain financial and/or performance
goals established by the Board and consideration of such other factors the Board
may deem relevant in its sole discretion from time to time (collectively, the
“Executive Bonus Plan”). The actual percentage of the Executive’s Base Salary
that the Board, in its sole discretion, may award the Executive under any
Executive Bonus Plan is referred to herein as the Executive’s “Bonus Level
Percentage.” The Bonus Level Percentage that Executive may be eligible for under
any Executive Bonus plan may be adjusted upward or downward from time to time in
the sole discretion of the Board, or replaced by another or Executive Bonus
Plan. The amount actually paid to the Executive through application of the Bonus
Level Percentage in any given year is the Executive’s “Annual Bonus.” Except as
otherwise provided in Section 6, (i) the Annual Bonus will be subject to the
terms of the Executive Bonus Plan under which it is granted and (ii) in order to
be eligible to receive an Annual Bonus, the Executive must achieve the financial
and/or performance goals established under the applicable Executive Bonus Plan
and be employed by the Company on the day that Annual Bonuses are paid.

 

3.3       Long-Term Incentive Compensation. With respect to each calendar year
of the Company ending during the Employment Term beginning in 2021, the
Executive shall be eligible to receive annual long-term equity incentive awards
under the Company’s 2013 Long-Term Incentive Plan (the “Plan”) or any successor
plan, with a target value equal to a percentage of Base Salary, determined by
the Board (based on the grant date value of any such award), based on the
achievement of performance goals established by the Board in its sole discretion
under any incentive compensation plan or arrangement as may be established by
the Board from time to time (collectively, the “Executive Long-Term Incentive
Plan”). Each such award shall contain vesting and other terms in the sole
discretion of the Board. All other terms and conditions applicable to each such
award shall be determined by the Board and shall be no less favorable than those
that apply to other executive officers of the Company. Under the Executive
Long-Term Incentive Plan, the Board may, in its discretion, set, in advance, an
annual target value percentage of the Executive’s Base Salary for the Executive.
The percentage of the Executive’s Base Salary that the Board designates for the
Executive to receive under any Executive Long-Term Incentive Plan, as such
percentage may be adjusted upward or downward from time to time in the sole
discretion of the Board.

3.4       Sign-On Incentive Compensation. Notwithstanding the provisions of
Section 3.2 and Section 3.3 above, the executive shall receive as bonus
consideration for the remainder of 2020, an amount equal to $18,000 per month
and shall receive a sign-on equity grant of 300,000 shares of Ring restricted
stock awarded on the executive’s first day of employment (“Award Date”), and the
restricted stock shall have a three (3) year vesting period, such vesting period
to begin on the Award Date and shall be subject to the terms and conditions of
the award agreements pursuant to which they are granted.

 

4.       Expenses and Other Benefits.

 

4.1       Reimbursement of Expenses. The Executive will be entitled to receive
prompt reimbursement for all reasonable expenses incurred by him during the
Employment Term (in accordance with the policies and practices presently
followed by the Company or as may be established by the Board from time to time
for the Company’s senior executive officers) in performing services under this
Agreement for the Company’s benefit; provided that the Executive properly
accounts for such expenses in accordance with the Company’s policies as in
effect from time to time. Such reimbursement shall be paid on or before the end
of the calendar year following the calendar year in which any such reimbursable
expense was incurred, and the Company shall not be obligated to pay any such
reimbursement amount for which Executive fails to submit an invoice or other
documented reimbursement request at least ten (10) business days before the end
of the calendar year next following the calendar year in which the expense was
incurred. Business related expenses shall be reimbursable only to the extent
they were incurred during the term of the Agreement, but in no event shall the
time period extend beyond the later of the lifetime of Executive or, if longer,
five (5) years. The amount of such reimbursements that the Company is obligated
to pay in any given calendar year shall not affect the amount the Company is
obligated to pay in any other calendar year. In addition, the Executive may not
liquidate or exchange the right to reimbursement of such expenses for any other
benefits.

 

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4.2       Vacation. The Executive will be entitled to paid vacation time each
year during the Employment Term that will accrue in accordance with the
Company’s policies and procedures now in force or as such policies and
procedures may be modified with respect to all senior executive officers of the
Company.

 

4.3       Other Executive Benefits. In addition to the foregoing, during the
Employment Term, the Executive will be entitled to participate in and to receive
benefits as a senior executive under all of the Company’s Executive benefit
plans, programs and arrangements available to senior executives, subject to the
eligibility criteria and other terms and conditions thereof, as such plans,
programs and arrangements may be duly amended, terminated, approved or adopted
by the Board from time to time.

 

5.       Termination of Employment.

 

5.1       Death. The Executive’s employment under this Agreement will terminate
upon his death.

 

5.2       Termination by the Company.

 

(a)        Terminable At Will. The Company may terminate the Executive’s
employment under this Agreement at any time with or without Cause (as defined
below).

 

(b)        Definition of Cause. For purposes of this Agreement, the Company will
have “Cause” to terminate the Executive’s employment under this Agreement by
reason of any of the following:

 

(i)        the Executive’s conviction of, or plea of nolo contendere to, any
felony or to any crime or offense causing substantial harm to any of the Company
or its direct or indirect subsidiaries (whether or not for personal gain) or
involving acts of theft, fraud, embezzlement, moral turpitude or similar
conduct;

 

(ii)        the Executive’s repeated intoxication by alcohol or other drugs
during the performance of his duties;

 

(iii)        the Executive’s willful and intentional misuse of any of the funds
of the Company or its direct or indirect subsidiaries;

 

(iv)       embezzlement against the Company or its direct or indirect
subsidiaries by the Executive;

 

(v)         the Executive’s willful and material misrepresentations or
concealments in any written reports submitted to any of the Company or its
direct or indirect subsidiaries;

 

(vi)       the Executive’s willful and intentional material breach of this
Agreement;

 

(vii)         the Executive’s material failure to follow or comply with the
reasonable and lawful written directives of the Board or to otherwise perform
his duties; or

 

(viii)         conduct constituting a material breach by the Executive of the
Company’s then current Corporate Code of Business Conduct and Ethics, and any
other written policy referenced therein; provided that in each case the
Executive knew or should have known such conduct to be a breach; or

 

(ix)       the Executive’s misconduct, which has or would have if generally
known, a materially adverse effect on the mission or reputation of the Company.

 

(c)        Notice and Cure Opportunity in Certain Circumstances. The Executive
may be afforded a reasonable opportunity to cure any act or omission that would
otherwise constitute “Cause” hereunder according to the following terms: The
Board shall give the Executive written notice stating with reasonable
specificity the nature of the circumstances determined by the Board in its
reasonable and good faith judgment to constitute “Cause.” If, in the reasonable
and good faith judgment of the Board, the alleged breach is reasonably
susceptible to cure, the Executive will have thirty (30) days from his receipt
of such notice to effect the cure of such circumstances or such breach to the
reasonable and good faith satisfaction of the Board. The Board will state
whether the Executive will have such an opportunity to cure in the initial
notice of “Cause” referred to above. Prior to termination for Cause, in those
instances where the initial notice of Cause states that the Executive will have
an opportunity to cure, the Company shall provide an opportunity for the
Executive to be heard by the Board or a Board committee designated by the Board
to hear the Executive. The decision as to whether the Executive has
satisfactorily cured the alleged breach shall be made at such meeting. If, in
the reasonable and good faith judgment of the Board, the alleged breach is not
reasonably susceptible to cure, or such circumstances or breach have not been
satisfactorily cured within such thirty (30) day cure period, such breach will
thereupon constitute “Cause” hereunder.

 

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5.3        Termination by the Executive.

 

(a)        Terminable at Will. The Executive may terminate his employment under
this Agreement at any time with or without Good Reason (as defined below).

 

(b)        Notice and Cure Opportunity. If such termination is with Good Reason,
the Executive will give the Company written notice, which will identify with
reasonable specificity the grounds for the Executive’s resignation and provide
the Company with thirty (30) days from the day such notice is given to cure the
alleged grounds for resignation contained in the notice. A termination will not
be for Good Reason if such notice is given by the Executive to the Company more
than ninety (90) days after the occurrence of the event that the Executive
alleges is Good Reason for his termination hereunder.

 

(c)       Definition of Good Reason Other Than Upon Change of Control. For
purposes of this Agreement, other than in the event of a Change of Control,
“Good Reason” will mean any of the following to which the Executive will not
consent in writing: (i) a material reduction of the Executive’s then current
Base Salary; (ii) failure by the Company to pay in full on a current basis (A)
any of the compensation or benefits described in this Agreement that are due and
owing, or (B) any amounts due and owing to the Executive under any long-term or
short-term or other incentive compensation plans, agreements or awards; (iii)
material breach of any provision of this Agreement by Company; (iv) any material
reduction in the Executive’s title, authority or responsibilities as set forth
in this Agreement; or (v) a relocation of the Executive’s primary place of
employment to a location more than fifty (50) miles from the Company’s future
office location in Houston, Texas.

 

(d)        Definition of Good Reason For Purposes of Change of Control. For
purposes of a Change of Control, “Good Reason” will mean any of the following to
which the Executive will not consent in writing, but only if the Termination
Date is within six (6) months before or twenty-four (24) months after a Change
of Control: (i) a material reduction in either the Executive’s then current Base
Salary, Bonus Level Percentage, or both; (ii) failure by the Company to pay in
full on a current basis (A) any of the compensation or benefits described in
this Agreement that are due and owing, or (B) any amounts due and owing to the
Executive under any long-term or short-term or other incentive compensation
plans, agreements or awards; (iii) a material breach of any provision of this
Agreement by the Company; (iv) any material reduction in the Executive’s title,
authority or responsibilities as set forth in this Agreement; or (v) a
relocation of the Executive’s primary place of employment to a location more
than fifty (50) miles from the Company’s principal future office location in
Houston, Texas on the day immediately preceding the Change of Control.

 

5.4        Notice of Termination. Any termination of the Executive’s employment
by the Company or by the Executive during the Employment Term (other than
termination pursuant to Section 5.1) will be communicated by written Notice of
Termination to the other party hereto in accordance with Section 8.7. For
purposes of this Agreement, a “Notice of Termination” means a written notice
that (a) indicates the specific termination provision in this Agreement relied
upon, (b) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated, and (c) if the Termination Date (as
defined herein) is other than the date of receipt of such notice, specifies the
Termination Date (which Termination Date will be not more than thirty (30) days
after the giving of such notice).

 

5.5        Disability. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Term, it may, without breaching this Agreement, give to the Executive
written notice in accordance with Section 5.4 of its intention to terminate the
Executive’s employment. In such event, the Executive’s employment with the
Company will terminate effective on the fifteenth (15th) day after receipt of
such notice by the Executive, provided that, within the fifteen (15) days after
such receipt, the Executive will not have returned to full-time performance of
the Executive’s duties.

 

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“Disability” means the Executive is unable to continue providing services by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months. For purposes of this Agreement, the
determination of Disability shall be made in the sole and absolute discretion of
the Board.

 

At any time upon reasonable request by the Company, the Executive will submit to
reasonable medical examination for the purpose of determining the existence,
nature and extent of any such Disability. Any physician selected by the Company
shall be certified in the appropriate field, shall have no actual or potential
conflict of interest, and may not be a physician who has been retained by the
Company for any purpose within the prior three (3) years.

 

6.       Compensation of the Executive Upon Termination. Subject to the
provisions of Sections 6.4(d), 6.7 and 6.8, the Executive shall be entitled to
receive the amount specified upon the termination events designated below:

 

6.1        Death. If the Executive’s employment under this Agreement is
terminated by reason of his death, the Company shall pay to the person or
persons designated by the Executive for that purpose in a notice filed with the
Company, or, if no such person will have been so designated, to his estate, one
lump sum payment within thirty (30) days following the Termination Date, the
amount of:

 

(a)        the Executive’s accrued but unpaid then current Base Salary through
the Termination Date, payable,

 

plus

 

(b)       the unpaid Bonus Level Amount, if any, with respect to the last full
year during which the Executive was employed by the Company determined as
follows:

 

(i)       If the Executive was employed for the entire previous year but the
Termination Date occurred prior to the Board finally determining the Bonus Level
Amount for the preceding year, then the Company’s performance will be deemed to
have been such that the Executive would have been awarded 100% of his Target
Bonus for that year (the “Deemed Full Year Bonus Amount”);

 

or

 

(ii)        If the Executive was employed for the entire previous year and the
Board had already finally determined the Bonus Level Amount for the preceding
year by the Termination Date but the Company had not yet paid the Executive his
Bonus Level Amount, then the Bonus Level Amount will be that Bonus Level Amount
determined by the Board (the “Actual Full Year Bonus Amount”);

 

plus

 

(c)        any other amounts that may be reimbursable by the Company to the
Executive as expressly provided under this Agreement.

 

For a period of up to the “maximum required period” as such period is set forth
under COBRA and the applicable regulations or twelve (12) months, whichever is
the greater, following the termination of this Agreement by reason of
Executive’s death, Executive’s spouse and eligible dependents will continue to
be eligible to receive medical coverage under the Company’s medical plans in
accordance with the terms of the applicable plan documents; provided, that in
order to receive such continued coverage at such rates, Executive’s spouse and
eligible dependents will be required to pay the applicable premiums to the plan
provider, and the Company will reimburse such spouse and eligible dependents,
within sixty (60) days following the date such monthly premium payment is due,
an amount equal to the monthly COBRA premium payment, less applicable tax
withholdings.

 

Thereafter, the Company will have no further obligation to the Executive or his
estate under this Agreement, other than for payment of any amounts accrued and
vested under any employee benefit plans or programs of the Company and any
payments or benefits required to be made or provided under applicable law.

 

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6.2        Disability. In the event of the Executive’s termination by reason of
Disability pursuant to Section 5.5, the Executive will continue to receive his
Base Salary in effect immediately prior to the Termination Date and participate
in applicable employee benefit plans or programs of the Company (on an
equivalent basis to those employee benefit plans or programs provided under
Section 6.4(a)(iv) below) through the Termination Date, subject to offset
dollar-for-dollar by the amount of any disability income payments provided to
the Executive under any Company disability policy or program funded by the
Company, and the Company shall pay the Executive the following amounts in a lump
sum within thirty (30) days following the Termination Date: the sum of (a) the
Executive’s accrued but unpaid then current Base Salary through the Termination
Date, plus (b) either the (i) unpaid Actual Full Year Bonus Amount, if any, or
(ii) the Deemed Full Year Bonus Amount, if applicable, plus (c) any other
amounts that may be reimbursable by the Company to the Executive as expressly
provided under this Agreement. Thereafter, the Company will have no further
obligation to the Executive under this Agreement, other than for payment of any
amounts accrued and vested under any employee benefit plans or programs of the
Company and any payments or benefits required to be made or provided under
applicable law.

 

6.3       By the Company for Cause or the Executive Without Good Reason. If the
Executive’s employment is terminated by the Company for Cause, or if the
Executive terminates his employment other than for Good Reason, the Executive
will receive (a) the Executive’s accrued but unpaid then current Base Salary
through the Termination Date, paid in accordance with applicable state law, and
(b) any other amounts that may be reimbursable by the Company to the Executive
as expressly provided under this Agreement, payable in a lump sum within thirty
(30) days following the Termination Date, and the Company thereafter will have
no further obligation to the Executive under this Agreement, other than for
payment of any amounts accrued and vested under any employee benefit plans or
programs of the Company, and any payments or benefits required to be made or
provided under applicable law. Notwithstanding anything in this Agreement to the
contrary, Executive shall not be eligible or entitled to receive any bonus
payments that have not been paid as of his Termination Date.

 

6.4        By the Executive for Good Reason or the Company Without Cause.

 

(a)        Severance Benefits on Non-Change of Control Termination. Subject to
the provisions of Section 6.4(b) and Section 6.4(d), if prior to the date that
precedes a Change of Control by at least six (6) months, or more than
twenty-four (24) months after the occurrence of a Change of Control (as defined
below) the Company terminates the Executive’s employment without Cause, or the
Executive terminates his employment for Good Reason, then the Executive will be
entitled to the following payments and benefits (the “Severance Benefits”)
following the Termination Date:

 

(i)an amount equal to the Executive’s accrued but unpaid then current Base
Salary through the Termination Date, which shall be paid in accordance with
applicable state or local law;

 

(ii)plus either (A) the unpaid Actual Full Year Bonus Amount, if any, or the
Deemed Full Year Bonus Amount, if applicable, plus (B) any other amounts that
may be reimbursable by the Company to the Executive as expressly provided under
this Agreement, payable in a single a lump sum payment within thirty (30) days
following the Termination Date;

 

plus

 

(iii)       a single lump sum equal to one (1.0) times the Executive’s annual
Base Salary at the highest rate in effect at any time during the thirty-six (36)
month period immediately preceding the Termination Date, payable in a single
lump sum within thirty (30) days following the Termination Date.

 

(iv)        All stock appreciation rights and other incentive awards held by the
Executive will become fully vested and immediately exercisable and all
restrictions on any restricted stock held by the Executive will be removed
(other than as may be required under applicable securities laws).

 

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(v)         If the Executive timely and properly elects health continuation
coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 or
other applicable law (“COBRA”), the Company shall reimburse the Executive for
the “Company’s portion” (as set defined below) of the continuation coverage (the
“COBRA Coverage”) for the duration of the “maximum required period” as such
period is set forth under COBRA and the applicable regulations. Following such
period, the Company shall permit the Executive (including his spouse and
dependents) to (A) continue to participate in the Company’s group health plan if
permitted under such plan, (B) convert the Company’s group health plan to an
individual policy, or (C) obtain other similar coverage, in each case for up to
an additional twelve (12) months after the expiration of the “maximum required
period” by the Executive paying one-hundred percent of the premiums for medical,
dental and vision coverage on an after-tax basis (“Medical Benefits”).
Notwithstanding the foregoing, the benefits described in this Section 6.4(a)(iv)
shall be discontinued by the Company prior to the end of the period provided in
this subsection in the event that the Executive receives substantially similar
benefits from a subsequent employer.

 

The “Company’s portion” of COBRA Coverage and of premiums for any continuing
Medical Benefits shall be the difference between one hundred percent (100%) of
the COBRA Coverage or Medical Benefits premium, as the case may be, and the
dollar amount of medical premium expenses paid for the same type or types of
Company medical benefits by a similarly situated employee on the Termination
Date.

 

(b)        Change of Control Benefits. Subject to the provisions of Section
6.4(d), if a Change of Control has occurred and the Executive’s employment was
terminated by the Company without Cause, or by the Executive for Good Reason as
defined in Section 5.3(d), during the period beginning six (6) months prior to
the Change of Control and ending twenty-four (24) months following the Change of
Control (an “Eligible Termination”), then in lieu of the Severance Benefits
under Section 6.4(a), the Executive will be entitled to benefits (the “Change of
Control Benefits”) with respect to an Eligible Termination, as follows:

 

(i)       Amounts identical to those set forth in Sections 6.4(a)(i)-(iii)
except that the amount described in Section 6.4(a)(iii) will be equal to one and
one-half (1.5) times the Executive’s annual Base Salary at the highest rate in
effect at any time during the thirty-six (36) month period immediately preceding
the Termination Date; provided, however, that if the Termination Date preceded
the Change of Control, then the Change of Control Benefits outlined in Sections
6.4(a)(ii) and (a)(iii) will be payable within the later of thirty (30) days
following the Termination Date and thirty (30) days following the Change of
Control.

 

(ii)       The Company will pay the same COBRA Coverage described in Sections
6.4(a)(v). Notwithstanding the foregoing, the benefits described in this Section
6.4(b)(ii) shall be discontinued by the Company prior to the end of the period
provided in this subsection (ii) if Executive receives substantially similar
benefits from a subsequent employer.

 

(iii)       All stock appreciation rights and other incentive awards held by the
Executive will become fully vested and immediately exercisable and all
restrictions on any restricted stock held by the Executive will be removed
(other than as may be required under applicable securities laws).

 

The foregoing notwithstanding, if the Termination Date preceded the Change of
Control, the amount of Severance Benefits to which the Executive will be
entitled will be the difference between the Severance Benefits already paid to
the Executive, if any, under Section 6.4(a) and the Severance Benefits to be
paid under this Section 6.4(b).

 

(c)        Definition of Change of Control. For purposes of this Agreement, a
“Change of Control” will mean the first to occur of:

 

(i)        A change in the ownership of the Company which occurs on the date any
one individual, entity or other person, or a related group of such persons (such
person or group, a “Person”) acquires ownership of stock of the Company that,
together with the stock held by such Person, constitutes more than fifty percent
(50%) of the total fair market value or total voting power of the stock of the
Company (whether such change in ownership occurs by way of a merger,
consolidation, purchase or acquisition of stock, or other similar business
transaction with the Company); provided, however, that, a Change of Control
shall not occur if any Person owns more than 50% of the total fair market value
or total voting power of the Company’s stock and acquires additional stock;

 

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(ii)        A change in the effective control of the Company which occurs on the
date a Person acquires (or has acquired during the 12-month period ending on the
date of the most recent acquisition) ownership of the Company’s stock possessing
fifty percent (50%) or more of the total voting power of the stock of the
Company; provided, however, if any Person is considered to be in effective
control of the Company, the acquisition of additional control of the Company by
the same Person will not be considered a Change in Control;

 

(iii)        A change in the effective control of the Company which occurs on
the date a majority of the members of the Board of the Company are replaced
during any 12-month period by directors whose appointment or election is not
endorsed by a majority of the members of the Board before the date of such
appointment or election; or

 

(iv)        A change in the ownership of a substantial portion of the Company’s
assets which occurs on the date any Person acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition) assets from
the Company that have a total gross fair market value equal to or more than
fifty percent (50%) of the total gross fair market value of all of the assets of
the Company immediately before such acquisition(s); provided, however, that for
purposes of this subsection 6.4(c)(iv), the following will not constitute a
change in the ownership of a substantial portion of the Company’s assets: (A) a
transfer to an entity that is controlled by the Company’s shareholders
immediately after the transfer, or (B) a transfer of assets by the Company to:
(1) a shareholder of the Company (immediately before the asset transfer) in
exchange for or with respect to the Company’s stock, (2) an entity, 50% or more
of the total value or voting power of which is owned, directly or indirectly, by
the Company, (3) a person, that owns, directly or indirectly, 50% or more of the
total value or voting power of all the outstanding stock of the Company, or (4)
an entity, at least 50% of the total value or voting power of which is owned,
directly or indirectly, by a person described in subpart (3) immediately above;
or

 

(v)        The date on which a complete liquidation or dissolution of the
Company is consummated.

 

For purposes of this definition, the term “gross fair market value” means the
value of the assets of the Company, or the value of the assets being disposed
of, determined without regard to any liabilities associated with such assets.
Furthermore, for purposes of this definition, Persons will be considered to be
acting as a group if they are owners of a corporation or other entity that
enters into a merger, consolidation, purchase or acquisition of stock, or
similar business transaction with the Company.

 

Notwithstanding anything herein to the contrary, with respect to any amounts
that constitute deferred compensation under Section 409A of the Code, to the
extent required to avoid accelerated taxation or penalties, no Change of Control
will be deemed to have occurred unless such Change of Control also constitutes a
change in control in the ownership or effective control of the Company or a
change in the ownership of a substantial portion of the Company’s assets under
Section 409A of the Code.

 

(d)        Conditions to Receipt of Severance Benefits.

 

(i)        Release. As a condition to receiving any Severance Benefits or Change
of Control Benefits to which the Executive may otherwise be entitled under
Section 6.4(a) or Section 6.4(b), the Executive will execute a release (the
“Release”), which will include an affirmation of the restrictive covenants set
forth in Section 7, a non-disparagement provision, and cooperation clause, in a
form and substance satisfactory to the Company and the Executive, of any claims,
whether arising under federal, state or local statute, common law or otherwise,
against the Company and its direct or indirect subsidiaries which arise or may
have arisen on or before the date of the Release, other than any claims under
this Agreement, which includes any claim to vested benefits under an employee
benefit plan, any claim arising after the execution of the Release or any rights
to indemnification from the Company and its direct or indirect subsidiaries
pursuant to any provisions of the Company’s (or any of its subsidiaries’)
organizational documents or any directors and officers liability insurance
policies maintained by the Company. The Company will provide the Release to the
Executive for signature within ten (10) days after the Termination Date. If the
Company has provided the Release to the Executive for signature within ten (10)
days after the Termination Date and if the Executive fails or otherwise refuses
to execute the Release within a reasonable time after the Company has provided
the Release to the Executive, and, in all events no later than sixty (60) days
after the Termination Date, the Executive will not be entitled to any Severance
Benefits or Change of Control Benefits, as the case may be, or any other
benefits provided under this Agreement that he is not otherwise entitled by law,
and the Company will have no further obligations with respect to the provision
of those benefits except as may be required by law. Such Release shall be void
ab initio, if Company thereafter fails to fully and timely pay all compensation
and benefits due to Executive under this Agreement.

 

-8-

 

 

(ii)        Limitation on Benefits. If, following a termination of employment
that gives the Executive a right to the payment of Severance Benefits or Change
of Control Benefits under Section 6.4(a) or Section 6.4(b), the Executive
violates or threatens to violate in any material respect any of the covenants in
Section 7 or as otherwise set forth in the Release, the Executive will have no
further right or claim to any payments or other benefits to which the Executive
may otherwise be entitled under Section 6.4(a) or Section 6.4(b) from and after
the date on which the Executive engages in such activities and the Company will
have no further obligations with respect to such payments or benefits and
Executive shall also be required to repay any Severance Benefits or Change of
Control Benefits that have been paid to him prior to the date on which the
Executive engages in such activity, in which case the covenants in Section 7
will nevertheless continue in full force and effect.

 

6.5        Severance Benefits Not Includable for Executive Benefits Purposes.
Except to the extent the terms of any applicable benefit plan, policy or program
provide otherwise, any benefit programs of the Company that take into account
the Executive’s income will exclude any and all Severance Benefits and Change of
Control Benefits provided under this Agreement.

 

6.6        Exclusive Severance Benefits. The Severance Benefits payable under
Section 6.4(a) or the Change of Control Benefits payable under Section 6.4(b),
if they become applicable under the terms of this Agreement, will be in lieu of
any other severance or similar benefits that would otherwise be payable under
any other agreement, plan, program or policy of the Company.

 

6.7        280G Limitation on Change in Control Benefits.

 

(a)        Notwithstanding anything in this Agreement to the contrary, if any
payment or benefit received or to be received by the Executive in connection
with a Change of Control or the termination of the Executive’s employment
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any other entity whose actions result in a Change
of Control or any entity affiliated with the Company) (all such payments and
benefits, including the Change of Control Benefits, being hereinafter referred
to as the “Total Payments”) would constitute an “excess parachute payment” under
Section 280G(a) of the Code (or any successor provision thereto) and would be
subject (in whole or part), to the excise tax imposed under Section 4999 of the
Code (or any successor provision thereto), including any similar state or local
tax and any related interest or penalties (collectively, the “Excise Tax”), then
prior to making the Total Payments, a calculation shall be made comparing (i)
the After-Tax Value (as defined below) to the Executive of the Total Payments
after payment of the Excise Tax to (ii) the After-Tax Value to the Executive if
the Total Payments are limited to the extent necessary to avoid being subject to
the Excise Tax. Only if the amount calculated under clause (i) above is less
than the amount under clause (ii) above will the Total Payments be reduced to
the minimum extent necessary to ensure that no portion of the Total Payments is
subject to the Excise Tax.

 

(b)       For purposes of this Agreement, “After-Tax Value” shall mean the
present value of the Total Payments reduced by all federal, state, local and
foreign income, excise and employment taxes applicable to such payments.
Furthermore, the terms “excess parachute payment” and “parachute payments” shall
have the meanings assigned to them in Code Section 280G, and such “parachute
payments” shall be valued as provided therein. All determinations and
calculations required to be made under this Section 6.7 shall be made by the
Company’s independent accountants (at Company’s expense), in consultation with
Executive and subject to the reasonable right of Executive’s representative(s)
to review and comment on such calculations prior to final determination. The
parties recognize that the actual implementation of the provisions of this
Section 6.7 may be complex and agree to deal with each other in good faith to
resolve any questions or disagreements arising hereunder.

 

(c)        The Total Payments shall be reduced, as applicable, in a manner that
maximizes the Executive’s economic position. In applying this principle, the
reduction shall be made in a manner consistent with the requirements of Code
Section 409A, and where two economically equivalent amounts are subject to
reduction but payable at different times, such amounts shall be reduced on a pro
rata basis but not below zero.

 

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6.8        Code Section 409A Matters.

 

(a)                 It is the intention of the Company and Executive that the
payments, benefits and rights to which Executive could be entitled pursuant to
this Agreement comply with or be exempt from Section 409A of the Code (or any
successor provision thereto), to the extent that the requirements of Section
409A of the Code are applicable thereto, after application of all available
exemptions (including without limitation the “short-term deferral rule” and
“involuntary separation pay plan exception”). The provisions of this Agreement
shall be construed in a manner consistent with that intention. If any provision
of this Agreement contravenes any applicable regulations or Treasury guidance
promulgated under Section 409A of the Code, or would cause Executive to incur
any additional tax, interest or penalty under Section 409A of the Code, the
Company and Executive agree in good faith to reform this Agreement to comply
with Section 409A of the Code. Furthermore, in the event that any benefits
payable or otherwise provided under this Agreement would be deemed to constitute
non-qualified deferred compensation subject to Section 409A of the Code, the
Company will have the discretion, without violating the provisions of Section
409A of the Code or the Treasury guidance thereunder, to adjust the terms of
such payment or benefit (but not the amount or value thereof) as reasonably
necessary or appropriate to avoid the imposition of any excise tax or other
penalty with respect to such payment or benefit under Section 409A of the Code.
Any provision required for compliance with Section 409A of the Code that is
omitted from this Agreement shall be incorporated herein by reference and shall
apply retroactively, if necessary, and be deemed a part of this Agreement to the
same extent as though expressly set forth herein. The Company makes no
representation with respect to the tax treatment of the payments and/or benefits
provided under this Agreement, and in no event will Company be liable for, pay
or reimburse any additional tax, interest or penalties that may be imposed on
Executive under Code Section 409A.

 

(b)                For purposes of applying the provisions of Section 409A of
the Code to this Agreement, each separately identified amount to which Executive
is entitled under this Agreement shall be treated as a separate payment within
the meaning of Section 409A of the Code. In addition, to the extent permissible
under Section 409A of the Code, any series of installment payments under this
Agreement shall be treated as a right to a series of separate payments.

 

(c)                 If required to comply with Section 409A of the Code (but
only to the extent so required), a termination of employment shall not be deemed
to have occurred for purposes of this Agreement providing for the payment of any
amounts or benefits upon or following a termination of employment unless such
termination is also a “Separation from Service” within the meaning of Section
409A of the Code (excluding death) and, for purposes of any provision of this
Agreement, references to “termination of employment,” “termination,” or like
terms shall mean “Separation from Service” (excluding death).

 

(d)                If any payment due under this Agreement is conditioned upon
the execution of a release of claims, and if the period for consideration of the
release (and any revocation period) spans two (2) of Executive’s tax years, then
such payment shall be made on the later of (i) the first business day following
the end of the revocation period, or (ii) the first business day of the second
taxable year.

 

(e)                 With regard to any provision herein that provides for
reimbursement of costs and expenses or in-kind benefits, except as permitted by
Code Section 409A, (i) the right to reimbursement or in-kind benefits is not
subject to liquidation or exchange for another benefit, and (iii) any such
payments shall be made on or before the last day of Executive’s taxable year
following the taxable year in which the expense was incurred.

 

(f)                  Notwithstanding anything in this Agreement to the contrary,
in the event that the Executive is a “specified employee” (as determined under
Section 409A of the Code) at the time of the separation from service triggering
the payment or provision of benefits, any payment or benefit under this
Agreement which is determined to provide for a deferral of compensation pursuant
to Section 409A of the Code shall not commence being paid or made available to
the Executive until after six (6) months from the Termination Date that
constitutes a separation from service within the meaning of Section 409A of the
Code, to the extent that such delay is necessary in order to comply with the
requirements of Section 409A of the Code.

 

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7.        Restrictive Covenants.

 

7.1       Confidential Information. The Executive hereby acknowledges that in
connection with his employment by the Company he will be exposed to and may
obtain certain Confidential Information (as defined below) (including, without
limitation, procedures, memoranda, notes, records and customer and supplier
lists whether such information has been or is made, developed or compiled by the
Executive or otherwise has been or is made available to him) regarding the
business and operations of the Company and its subsidiaries or affiliates. The
Executive further acknowledges that such Confidential Information is unique,
valuable, considered trade secrets and deemed proprietary by the Company. For
purposes of this Agreement, “Confidential Information” includes, without
limitation, any information heretofore or hereafter acquired, developed or used
by the Company or its direct or indirect subsidiaries relating to Business
Opportunities or Intellectual Property (as those terms are defined below) or
other geological, geophysical, economic, financial or management aspects of the
business, operations, properties or prospects of the Company or its direct or
indirect subsidiaries, whether oral or in written form. The Executive agrees
that all Confidential Information is and will remain the property of the Company
or its direct or indirect subsidiaries, as the case may be. The Executive
further agrees, except for disclosures occurring in the good faith performance
of his duties for the Company or its direct or indirect subsidiaries, during the
Employment Term, the Executive will hold in the strictest confidence all
Confidential Information, and will not, both during the Employment Term and
after the Termination Date, directly or indirectly, duplicate, sell, use, lease,
commercialize, disclose or otherwise divulge to any person or entity any portion
of the Confidential Information or use any Confidential Information, directly or
indirectly, for his own benefit or profit or allow any person, entity or third
party, other than the Company or its direct or indirect subsidiaries and
authorized executives of the same, to use or otherwise gain access to any
Confidential Information. The Executive will have no obligation under this
Agreement with respect to any information that becomes generally available to
the public other than as a result of a disclosure by the Executive or his agent
or other representative or becomes available to the Executive on a
non-confidential basis from a source other than the Company or its direct or
indirect subsidiaries. Further, the Executive will have no obligation under this
Agreement to keep confidential any of the Confidential Information to the extent
that a disclosure of it is required by law or is consented to by the Company;
provided, however, that if and when such a disclosure is required by law, the
Executive promptly will provide the Company with notice of such requirement, so
that the Company may seek an appropriate protective order. Executive understands
that nothing contained in this Agreement limits Executive’s ability to file a
charge or complaint with the Equal Employment Opportunity Commission, the
National Labor Relations Board, the Occupational Safety and Health
Administration, the Securities and Exchange Commission or any other federal,
state or local governmental agency or commission (collectively, “Government
Agencies”). Executive further understands that this Agreement does not limit
Executive’s ability to communicate with any Government Agencies or otherwise
participate in any investigation or proceeding that may be conducted by any
Government Agency, including providing documents or other information, without
notice to the Company. This Agreement does not limit Executive’s right to
receive an award for information provided to any Government Agencies.

 

7.2        Return of Property. Executive agrees to deliver promptly to the
Company, upon termination of his employment hereunder, or at any other time when
the Company so requests, all documents relating to the business of the Company
or its direct or indirect subsidiaries, including without limitation: all
geological and geophysical reports and related data such as maps, charts, logs,
seismographs, seismic records and other reports and related data, calculations,
summaries, memoranda and opinions relating to the foregoing, production records,
electric logs, core data, pressure data, lease files, well files and records,
land files, abstracts, title opinions, title or curative matters, contract
files, notes, records, drawings, manuals, correspondence, financial and
accounting information, customer lists, statistical data and compilations,
patents, copyrights, trademarks, trade names, inventions, formulae, methods,
processes, agreements, contracts, manuals or any documents relating to the
business of the Company or its direct or indirect subsidiaries and all copies
thereof and therefrom; provided, however, that the Executive will be permitted
to retain copies of any documents or materials of a personal nature or otherwise
related to the Executive’s rights under this Agreement, copies of this Agreement
and any attendant or ancillary documents.

 

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7.3        Non-Compete Obligations. In exchange for Executive’s access to the
Company’s Confidential Information, which Executive agrees is good and valuable
consideration, the Executive agrees to the following restrictions:

 

(a)        Non-Compete Obligations During Employment Term. the Executive agrees
that during the Employment Term:

 

(i)        the Executive will not, other than through the Company, engage or
participate in any manner, whether directly or indirectly through any family
member or as an Executive, employer, consultant, agent, principal, partner, more
than one percent (1%) shareholder, officer, director, licensor, lender, lessor
or in any other individual or representative capacity, in any business or
activity which is engaged in leasing, acquiring, exploring, producing, gathering
or marketing hydrocarbons and related products (“Competing Business”); provided
that the foregoing shall not be deemed to restrain the participation by the
Executive’s spouse in any capacity set forth above in any business or activity
engaged in any such activity and provided further that the Company may, in good
faith, take such reasonable action with respect to the Executive’s performance
of his duties, responsibilities and authorities as set forth in Sections 1.1 and
1.2 of this Agreement as it deems necessary and appropriate to protect its
legitimate business interests with respect to any actual or apparent conflict of
interest reasonably arising from or out of the participation by Executive’s
spouse in any such competitive business or activity; and

 

(ii)        all investments made by the Executive (whether in his own name or in
the name of any family members or other nominees or made by the Executive’s
controlled affiliates), which relate to the leasing, acquisition, exploration,
production, gathering or marketing of hydrocarbons and related products will be
made solely through the Company, other than as may be approved by the Board of
Directors; and the Executive will not (directly or indirectly through any family
members or other persons), and will not permit any of his controlled affiliates
to: (A) invest or otherwise participate alongside the Company or its direct or
indirect subsidiaries in any Business Opportunities (as defined below), or (B)
invest or otherwise participate in any business or activity relating to a
Business Opportunity, regardless of whether any of the Company or its direct or
indirect subsidiaries ultimately participates in such business or activity, in
either case, except through the Company. Notwithstanding the foregoing, nothing
in this Section 7.3 shall be deemed to prohibit the Executive or any family
member from owning, or otherwise having an interest in, less than one percent
(1%) of any publicly owned entity or three percent (3%) or less of any private
equity fund or similar investment fund that invests in any business or activity
engaged in any of the activities set forth above, provided that Executive has no
active role with respect to any investment by such fund in any entity.

 

(b)        Non-Compete Obligations After Termination Date. The Executive agrees
that the Executive will not engage or participate in any manner, whether
directly or indirectly, through any family member or other person or as an
employee, employer, consultant, agent principal, partner, more than one percent
(1%) shareholder, officer, director, licensor, lender, lessor or in any other
individual or representative capacity during the one (1) year period following
the Termination Date (the “Restricted Period”), in any Competing Business within
the boundaries of, or within a two-mile radius of the boundaries of, any mineral
property interest of any of the Company or its direct or indirect subsidiaries
(including, without limitation, a mineral lease, overriding royalty interest,
production payment, net profits interest, mineral fee interest or option or
right to acquire any of the foregoing, or an area of mutual interest as
designated pursuant to contractual agreements between the Company and any third
party) or any other property on which any of the Company or its direct or
indirect subsidiaries has an option, right, license or authority to conduct or
direct exploratory activities, such as three-dimensional seismic acquisition or
other seismic, geophysical and geochemical activities (but not including any
preliminary geological mapping), as of the Termination Date or as of the end of
the six (6) month period following such Termination Date; provided that, this
Section 7.3(b) will not preclude the Executive from making investments in
securities of oil and gas companies which are registered on a national stock
exchange, if (A) the aggregate amount owned by the Executive and all family
members and affiliates does not exceed five percent (5%) of such company’s
outstanding securities, and (B) the aggregate amount invested in such
investments by the Executive and all family members and affiliates after the
date hereof does not exceed $1,000,000.

 

Notwithstanding the foregoing, nothing in this Section 7.3 shall be deemed to
restrain the participation by Executive’s spouse in any capacity set forth above
in any business or activity described above.

 

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(c)        Not Applicable Following Change of Control Termination. The Executive
will not be subject to the covenants contained in Section 7.3(b) and such
covenants will not be enforceable against the Executive from and after the date
of an Eligible Termination if such Eligible Termination occurs within six (6)
months before or twenty-four (24) months after a Change of Control.

 

7.4        Non-Solicitation.

 

(a)        Non-Solicitation Other than Following a Change of Control
Termination. During the Employment Term and the Restricted Period, the Executive
will not, whether for his own account or for the account of any other Person
(other than the Company or its direct or indirect subsidiaries), (i)
intentionally solicit, endeavor to entice away from the Company or its direct or
indirect subsidiaries, or otherwise interfere with the relationship of the
Company or its direct or indirect subsidiaries with, any person who is employed
by the Company or its direct or indirect subsidiaries (including any independent
sales representatives or organizations), or (ii) using Confidential Information,
solicit, endeavor to entice away from the Company or its direct or indirect
subsidiaries, or otherwise interfere with the relationship of the Company or its
direct or indirect subsidiaries with, any client or customer of the Company or
its direct or indirect subsidiaries in direct competition with the Company.

 

(b)        Not Applicable Following Change of Control Termination. The Executive
will not be subject to the covenants contained in Section 7.4(a) and such
covenants will not be enforceable against the Executive from and after the date
of an Eligible Termination if such Eligible Termination occurs within six (6)
months before or twenty-four (24) months following a Change of Control.

 

7.5        Assignment of Developments. The Executive assigns and agrees to
assign without further compensation to the Company and its successors, assigns
or designees, all of the Executive’s right, title and interest in and to all
Business Opportunities and Intellectual Property (as those terms are defined
below), and further acknowledges and agrees that all Business Opportunities and
Intellectual Property constitute the exclusive property of the Company.

 

For purposes of this Agreement, “Business Opportunities” means all business
ideas, prospects, proposals or other opportunities pertaining to the lease,
acquisition, exploration, production, gathering or marketing of hydrocarbons and
related products and the exploration potential of geographical areas on which
hydrocarbon exploration prospects are located, which are developed by the
Executive during the Employment Term, or originated by any third party and
brought to the attention of the Executive during the Employment Term, together
with information relating thereto (including, without limitation, geological and
seismic data and interpretations thereof, whether in the form of maps, charts,
logs, seismographs, calculations, summaries, memoranda, opinions or other
written or charted means).

 

For purposes of this Agreement, “Intellectual Property” shall mean all ideas,
inventions, discoveries, processes, designs, methods, substances, articles,
computer programs and improvements (including, without limitation, enhancements
to, or further interpretation or processing of, information that was in the
possession of the Executive prior to the date of this Agreement), whether or not
patentable or copyrightable, which do not fall within the definition of Business
Opportunities, which the Executive discovers, conceives, invents, creates or
develops, alone or with others, during the Employment Term, if such discovery,
conception, invention, creation or development (a) occurs in the course of the
Executive’s employment with the Company, (b) occurs with the use of any of the
time, materials or facilities of the Company or its direct or indirect
subsidiaries, and (c) in the good faith judgment of the Board, relates or
pertains in any material way to the purposes, activities or affairs of the
Company or its direct or indirect subsidiaries.

 

7.6        Injunctive Relief. The Executive acknowledges that a breach of any of
the covenants contained in this Section 7 may result in material, irreparable
injury to the Company for which there is no adequate remedy at law, that it will
not be possible to measure damages for such injuries precisely and that, in the
event of such a breach or threat of breach, the Company will be entitled to
obtain a temporary restraining order and/or a preliminary or permanent
injunction restraining the Executive from engaging in activities prohibited by
this Section 7 or such other relief as may be required to specifically enforce
any of the covenants in this Section 7.

 

7.7        Adjustment of Covenants. The parties consider the covenants and
restrictions contained in this Section 7 to be reasonable. However, if any such
covenant or restriction or part thereof is found to be void or unenforceable and
would have been valid had some part of it been deleted or had its scope of
application been modified, such covenant, restriction, or part thereof will be
deemed to have been applied with such modification as would be necessary and
consistent with the intent of the parties to have made it valid, enforceable and
effective.

 

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7.8        Forfeiture Provision.

 

(a)        Detrimental Activities. If the Executive engages in any activity that
violates any covenant or restriction contained in this Section 7, in addition to
any other remedy the Company may have at law or in equity, (i) the Executive
will be entitled to no further payments or benefits from the Company under this
Agreement or otherwise, except for any payments or benefits required to be made
or provided under applicable law, (ii) all unexercised forms of equity
compensation held by or credited to the Executive will terminate effective as of
the date on which the Executive engages in that activity, unless terminated
sooner by operation of another term or condition of this Agreement or other
applicable plans and agreements, and (iii) any exercise, payment or delivery
pursuant to any equity compensation award that occurred within one (1) year
prior to the date on which the Executive engages in that activity may be
rescinded within one (1) year after the first date that a majority of the
members of the Board first became aware that the Executive engaged in that
activity. In the event of any such rescission, the Executive will pay to the
Company the amount of any gain realized or payment received as a result of the
rescinded exercise, payment or delivery, in such manner and on such terms and
conditions as may be required.

 

(b)        Right of Setoff. The Executive consents to a deduction from any
amounts the Company owes the Executive from time to time (including amounts owed
as wages or other compensation, fringe benefits, or vacation pay, as well as any
other amounts owed to the Executive by the Company), to the extent of the
amounts the Executive owes the Company under Section 7.8(a). Whether or not the
Company elects to make any setoff in whole or in part, if the Company does not
recover by means of setoff the full amount the Executive owes, calculated as set
forth above, the Executive agrees to pay immediately the unpaid balance to the
Company. In the discretion of the Board, reasonable interest may be assessed on
the amounts owed, calculated from the later of (i) the date the Executive
engages in the prohibited activity and (ii) the applicable date of exercise,
payment or delivery.

 

(c)        Forfeiture by Company. In the event that Company fails to timely and
fully pay to Executive all Severance Benefits or Change of Control Benefits due
under this Agreement, then Company shall forfeit all right to enforce this
Section 7.

 

7.9        Tolling. In the event that the Executive breaches any of the
restrictive covenants set forth in this Section 7, the running of the Restricted
Period shall be tolled and suspended during the time period in which the
Executive acts in breach of his obligations set forth in this Section 7.

 

8.        Miscellaneous.

 

8.1        Assignment; Successors; Binding Agreement. This Agreement may not be
assigned by either party, whether by operation of law or otherwise, without the
prior written consent of the other party, except that any right, title or
interest of the Company arising out of this Agreement may be assigned to any
corporation or other entity controlling, controlled by, or under common control
with the Company, or to any corporation or other entity or person succeeding to
the business and substantially all of the assets of the Company or any
affiliates for which the Executive performs substantial services whether by
reason of a merger, consolidation, statutory share exchange, sale of assets or
similar form of corporate transaction (a “Business Combination”). Subject to the
foregoing, this Agreement will be binding upon and will inure to the benefit of
the parties and their respective heirs, legatees, devisees, personal
representatives, successors and assigns. The Company agrees that in connection
with any Business Combination, it shall obtain from any successor entity or
person to the Company a written agreement to assume and perform all obligations
of the Company under this Agreement (and shall cause any parent corporation or
entity in such Business Combination to guarantee such obligations). Failure of
the Company to obtain such assumption and guarantee prior to the effectiveness
of any such Business Combination that constitutes a Change of Control shall be a
material breach of this Agreement.

 

8.2        Modification and Waiver. Except as otherwise provided below, no
provision of this Agreement may be modified, waived, or discharged unless such
waiver, modification or discharge is duly approved by the Board and is agreed to
in writing by the Executive and such officer(s) as may be specifically
authorized by the Board to effect it. No waiver by any party of any breach by
any other party of, or of compliance with, any term or condition of this
Agreement to be performed by any other party, at any time, will constitute a
waiver of similar or dissimilar terms or conditions at that time or at any prior
or subsequent time.

 

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8.3        Entire Agreement. This Agreement together with any attendant or
ancillary documents, embodies the entire understanding of the parties hereto,
and, upon the Effective Date, will supersede all other oral or written
agreements or understandings between them regarding the subject matter hereof;
provided, however, that if there is a conflict between any of the terms in this
Agreement and the terms in any ancillary document to which the Executive is
party or any other award agreement between the Company and the Executive, the
terms of this Agreement shall govern. No agreement or representation, oral or
otherwise, express or implied, with respect to the subject matter of this
Agreement, has been made by either party which is not set forth expressly in
this Agreement or the other documents referenced in this Section 8.3.

 

8.4        Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by the laws of the State of Texas
other than the conflict of laws provision thereof.

 

8.5        Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.

 

(a)        Disputes. In the event of any dispute, controversy or claim between
the Company and the Executive arising out of or relating to the interpretation,
application or enforcement of the provisions of this Agreement, the Company and
the Executive agree and consent to the personal jurisdiction of the federal,
state, and local courts located in Harris County, Texas for resolution of the
dispute, controversy or claim, and that those courts, and only those courts,
shall have any jurisdiction to determine any dispute, controversy or claim
related to, arising under or in connection with this Agreement. The Company and
the Executive also agree that those courts are convenient forums for the parties
to any such dispute, controversy or claim and for any potential witnesses and
that process issued out of any such court or in accordance with the rules of
practice of that court may be served by mail or other forms of substituted
service to the Company at the address of its principal executive offices and to
the Executive at his last known address as reflected in the Company’s records.

 

(b)        Waiver of Right to Jury Trial.

 

THE COMPANY AND THE EXECUTIVE HEREBY VOLUNTARILY, KNOWINGLY AND INTENTIONALLY
WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY TO ALL CLAIMS ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AS WELL AS TO ALL CLAIMS ARISING OUT OF EXECUTIVE’S
EMPLOYMENT WITH THE COMPANY OR TERMINATION THEREFROM INCLUDING, BUT NOT LIMITED
TO:

 

(i)        Any and all claims and causes of action arising under contract, tort
or other common law including, without limitation, breach of contract, fraud,
estoppel, misrepresentation, express or implied duties of good faith and fair
dealing, wrongful discharge, discrimination, retaliation, harassment,
negligence, gross negligence, false imprisonment, assault and battery,
conspiracy, intentional or negligent infliction of emotional distress, slander,
libel, defamation and invasion of privacy.

 

(ii)        Any and all claims and causes of action arising under any federal,
state or local law, regulation or ordinance, including, without limitation,
claims arising under Title VII of the Civil Rights Act of 1964, the Pregnancy
Discrimination Act, the Age Discrimination in Employment Act, the Americans with
Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act
and all corresponding state laws.

 

(iii)       Any and all claims and causes of action for wages, employee
benefits, vacation pay, severance pay, pension or profit sharing benefits,
health or welfare benefits, bonus compensation, commissions, deferred
compensation or other remuneration, employment benefits or compensation, past or
future loss of pay or benefits or expenses.

 

8.6        Withholding of Taxes. The Company will withhold from any amounts
payable under the Agreement all federal, state, local or other taxes as legally
will be required to be withheld.

 

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8.7        Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by facsimile (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, (c) sent by email, when
the electronic receipt requested is received by sender, or (d) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties).

 

to the Company:

 

Ring Energy, Inc.

Attention: Chairman of the Board

901 West Wall St., 3rd Floor

Midland, Texas 79701

Email: LeadDirector@ringenergy.com

 

to the Executive:

 

The address of the Executive:

 

Paul D. McKinney

22 Hepplewhite Way

The Woodlands, TX 77382

Personal Email: paul.mckinney100@gmail.com

 

Addresses may be changed by written notice sent to the other party at the last
recorded address of that party.

 

8.8        Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement, or parts thereof, will not affect the validity or
enforceability of any other provision of this Agreement, which will remain in
full force and effect.

 

8.9        Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same instrument.

 

8.10        Headings. The headings used in this Agreement are for convenience
only, do not constitute a part of the Agreement, and will not be deemed to
limit, characterize, or affect in any way the provisions of the Agreement, and
all provisions of the Agreement will be construed as if no headings had been
used in the Agreement.

 

8.11        Construction. As used in this Agreement, unless the context
otherwise requires: (a) the terms defined herein will have the meanings set
forth herein for all purposes; (b) references to “Section “ are to a section
hereof; (c) “include,” “includes” and “including” are deemed to be followed by
“without limitation” whether or not they are in fact followed by such words or
words of like import; (d) “writing,” “written” and comparable terms refer to
printing, typing, lithography and other means of reproducing words in a visible
form; (e) “hereof,” “herein,” “hereunder” and comparable terms refer to the
entirety of this Agreement and not to any particular section or other
subdivision hereof or attachment hereto; (f) references to any gender include
references to all genders; and (g) references to any agreement or other
instrument or statute or regulation are referred to as amended or supplemented
from time to time (and, in the case of a statute or regulation, to any successor
provision).

 

8.12        Capacity; No Conflicts. The Executive represents and warrants to the
Company that: (a) he has full power, authority and capacity to execute and
deliver this Agreement, and to perform his obligations hereunder, (b) such
execution, delivery and performance will not (and with the giving of notice or
lapse of time, or both, would not) result in the breach of any agreement or
other obligation to which he is a party or is otherwise bound, and (c) this
Agreement is his valid and binding obligation, enforceable in accordance with
its terms. Executive warrants and represents that he has actual authority to
enter into this Agreement as the authorized act of the indicated entities.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
September 30, 2020.

 

RING ENERGY, INC.:

 

By:  /s/ Lloyd T. Rochford  

Name: Lloyd T. Rochford

Title: Chairman of the Board

  

EXECUTIVE:

 

  /s/ Paul D. McKinney  

Paul D. McKinney

 

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