Texas South Energy, Inc. 8-K [txso-8k_010417.htm]

 

Exhibit 10.2

Employment Agreement
(Michael J. Mayell)

This Employment Agreement (“Agreement”) is entered into effective as of January
4, 2017 (the “Effective Date”), by and between Texas South Energy, Inc., a
Nevada corporation (the “Company”), and Michael J. Mayell (“Employee”).

WHEREAS, the Company wishes to employ Employee and Employee wishes to be
employed by the Company; and

WHEREAS, the Company and Employee desire to enter into an agreement reflecting
the terms of the employment relationship, including the termination thereof;

NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties, and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:

1.       

Employment. The Company hereby employs Employee, and Employee will hereby be
employed by the Company, on the terms and conditions set forth in this
Agreement.

2.       

Term of Employment. Subject to the provisions for earlier termination provided
in this Agreement, the term of this Agreement shall begin on January 4, 2017 and
shall terminate on December 31, 2019. Upon December 31 of each calendar year,
commencing on December 31, 2017, the term shall be extended for one additional
year (the initial Term, together with each such year extension shall be referred
to as the “Term”), provided that neither the Company nor Employee notify the
other on or prior to 90 days before the applicable December 31st date that
either party does not intend to extend this Agreement.

3.       

Employee’s Duties. During the Term, Employee shall serve as President and Chief
Executive Officer with such duties and responsibilities as may from time to time
be assigned to him by the board of directors of the Company (the “Board”),
provided that such duties are consistent with the customary duties of such
position. During the Term, Employee shall serve as a member of the Board.
Employee agrees to devote his skill and attention to the business and affairs of
the Company and to use reasonable best efforts to perform faithfully and
efficiently his duties and responsibilities. Employee shall not, either directly
or indirectly, enter into any full-time employment with or for any person, firm,
association or corporation other than the Company during the Term; provided,
however, that Employee shall not be prohibited from (i) engaging in charitable
activities, educational mentoring, and community affairs, (ii) serving, with the
prior approval of the Company’s Board, on the boards of a reasonable number of
business entities, trade associations and charitable organizations, (iii) 
managing his personal investments and affairs related to another business or
companies (either as a principal, partner, shareholder, or member of such
business), including operating the business of Sydson Energy, Inc. and Sydson
Resources, L.P., or (iv) any other such activity approved by the Board; provided
that such activities do not either individually or in the aggregate materially
interfere with the performance of his duties hereunder. Employee shall at all
times observe and comply with all lawful directions and instructions of the
Board.

  

 

 

4.       

Compensation. For services rendered by Employee under this Agreement, the
Company shall pay to Employee a base salary of $420,000 per annum (“Base
Compensation”). The Base Compensation is payable in accordance with the
Company’s customary payroll practices and subject to customary withholdings,
including share withholdings as described in Section 14(b) hereof. The amount of
Base Compensation shall be reviewed by the Board on an annual basis as of the
close of each 12-month period of this Agreement and may be increased as the
Board may deem appropriate. In the event the Board (or, if established, the
compensation committee thereof) deems it appropriate to increase Employee’s
annual base salary, said increased amount shall thereafter be the “Base
Compensation.” Employee’s Base Compensation, as increased from time to time, may
not thereafter be decreased unless agreed to by Employee. Nothing contained
herein shall prevent the Board from paying additional compensation to Employee
in the form of bonuses or otherwise during the Term.

5.       

Bonus. The Board in its sole discretion may grant the Employee a bonus (“Bonus”)
payable in shares of restricted common stock or cash, as determined.

6.       

Additional Benefits. In addition to the Base Compensation provided for in
Section 5 herein, Employee shall be entitled to the following:

(a)       

Expenses. The Company shall, in accordance with any rules and policies that it
may establish from time to time for executive officers, reimburse Employee for
business expenses reasonably incurred in the performance of his duties. It is
understood that Employee is authorized to incur reasonable business expenses for
promoting the business of the Company, including reasonable expenditures for
travel, lodging, meals and client or business associate entertainment. Request
for reimbursement for such expenses must be accompanied by appropriate
documentation, and shall be reimbursed in accordance with the Company’s rules
and policies as in effect from time to time and as set forth in
Section 8(k)(iii) below.

(b)       

Vacation. Employee shall be entitled to vacation time, as determined by the
Board, of not less than 6 weeks per year. Employee shall not be entitled to
compensation for, or to carry forward, any unused vacation time. Vacation time
shall mean personal time when Employee is not available to the Company by
telephone, email or other communication.

(c)       

General Benefits. Employee shall be entitled to health insurance benefits,
either pursuant to a plan or shall be reimbursed if Employee maintains his own
health insurance.

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(d)       

Corporate Change. Upon the occurrence of a “Corporate Change” as hereinafter
defined, Employee shall be considered as immediately and totally vested in any
and all similar equity or equity-based awards previously made to Employee by the
Company or its subsidiaries under a “Long Term Incentive Plan” or other grant
duly adopted by the Board or the Compensation Committee thereof (such options or
similar awards are hereinafter collectively referred to as “Awards”); provided,
however, with respect to Awards that are deferred compensation subject to Code
Section 409A, such accelerated vesting shall not cause an acceleration of a
payment or result in a change in form of payment that would violate Code
Section 409A. For purposes of this Agreement, a “Corporate Change “ shall occur
if (i) the Company (A) shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of an
entity other than a previously wholly-owned subsidiary of the Company) or (B) is
to be dissolved and liquidated, and as a result of or in connection with such
transaction, the persons who were directors of the Company before such
transaction shall cease to constitute a majority of the Board, or (ii) any
person or entity, including a “group” as contemplated by Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of 50% or more of the
outstanding shares of the Company’s voting stock (based upon voting power), and
as a result of or in connection with such transaction, the persons who were
directors of the Company before such transaction shall cease to constitute a
majority of the Board, or (iii) the Company sells all or substantially all of
the assets of the Company to any other person or entity (other than a
wholly-owned subsidiary of the Company) in a transaction that requires
shareholder approval pursuant to applicable corporate law; or (iv) during a
period of two consecutive calendar years, individuals who at the beginning of
such period constitute the Board, and any new director(s) whose election by the
Board or nomination for election by the Company’s stockholders was approved by a
vote of at least a majority of the directors then still in office, who either
were directors at the beginning of the two (2) year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the Board; or (v) any other event that a majority of
the Board, in its sole discretion, shall determine constitutes a Corporate
Change hereunder.

(e)       

Country Club and/or Health Club Dues; Car Allowance. The Company shall pay for
Employee’s country club and/or health club dues and provide for an appropriate
car allowance, as determined by the Board.

7.       

Confidential Information and Non-Compete. Employee, during the Term, will have
access to and become familiar with confidential information, secrets and
proprietary information concerning the business and affairs of the Company, its
controlled subsidiaries and other controlled entities, including technical
information, resource valuations and reports, business strategies and pricing
information, and other confidential and/or proprietary information
(collectively, “Confidential Information”). Confidential Information shall not
include any information that is or becomes generally available to the public
other than as a result of Employee’s improper or unauthorized disclosure of such
information in violation of this Agreement. As to such Confidential Information,
Employee agrees as follows:

(a)       

During the Term or at any time following the termination of this Agreement,
Employee will not, directly or indirectly, without the prior written consent of
the Company (1) disclose or permit the disclosure of any such Confidential
Information, or (2) use, reproduce or distribute, or make or permit any use,
reproduction or distribution of, directly or indirectly, any such Confidential
Information, except for any disclosure, use, reproduction or distribution that
is required or appropriate in the course of his employment with the Company, its
controlled subsidiaries or other controlled entities.

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(b)       

If, during the Term or at any time following the termination of this Agreement,
Employee is requested or required (by oral question or request for information
or documents, in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Employee agrees to notify the Company immediately in writing of the
request or requirement so that the Company may seek an appropriate protection
order or waive compliance with the provisions of this Section. If, in the
absence of a protective order or the receipt of a waiver under this Agreement,
Employee is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, Employee may
disclose such Confidential Information to the tribunal; provided, however, that
Employee shall use his commercially reasonable best efforts to obtain a court
order or other assurance that confidential treatment will be accorded to such
Confidential Information.

(c)       

Upon termination of employment of Employee, for whatever reason, Employee shall
surrender to the Company or destroy any and all documents, manuals,
correspondence, reports, records and similar items then or thereafter coming
into the possession of Employee which contain any Confidential Information of
the Company or its controlled subsidiaries or other controlled entities.

(d)       

Employee agrees that, while serving as an executive officer and/or director of
the Company (the “Restrictive Period”), he shall not, without the consent of the
Company, in the States of Texas and Louisiana and offshore in the Gulf of Mexico
(the “Restricted Territories”), engage in the oil and gas business (the
“Restricted Business”); further, Employee agrees that during the Restrictive
Period he will not participate, directly or indirectly, in the management or
operation of or become an investor in (other than with respect to ownership of
less than five percent (5%) of the outstanding shares of any class of equity
securities listed on a national securities exchange or quoted on the Nasdaq
National Market or SmallCap System), any corporation, partnership entity,
limited liability company, venture or enterprise of whatever kind, which is
engaged in the Restricted Business anywhere in the Restricted Territories.
Employee agrees on his behalf and on behalf of his affiliates that none of them
will, directly or indirectly, alone or with others, during the Restrictive
Period, solicit or assist anyone else in the solicitation of, any employee of
the Company to terminate his or her employment with the Company, provided that
such restriction shall not apply to any such employee who responds to a general
advertisement of employment with an affiliate of Employee. Notwithstanding the
above, the Company acknowledges and understands that (i) Sydson Energy, Inc. and
Sydson Resources, LP are ongoing businesses owning as much as a 50% working
interest in certain prospects owned by the Company, and (ii) Sydson Energy, Inc.
and Sydson Resources, LP will continue to conduct their respective business
provided that they agree not to directly compete with the Company in any of its
projects and to offer the Company a participation of up to 50% in any new
projects that Employee, Sydson Energy, Inc. or Sydson Resources, LP may acquire
or develop in the Restricted Territory during the Restrictive Period in the
event that the Company consents to Employee’s pursuit of such opportunity.
Sydson Resources, LP, Sydson Energy, Inc. and Employee reserve the right to
participate on a minority, non-operating working interest basis with the Company
with respect to minority positions, as the Company may offer in its sole
discretion.

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(e)       

Employee recognizes and acknowledges that the obligations of Employee contained
in Section 7 of this Agreement are reasonable and necessary to protect the
legitimate business interests of the Company, and that any breach or violation
of any of the provisions of such Section is likely to result in irreparable
injury to the Company for which the Company would have no adequate remedy at
law. Employee agrees that if Employee shall breach or violate Section 7 of this
Agreement, the Company shall be entitled, if it so elects, to institute and
prosecute proceedings at law or in equity, including, but not limited to, a
proceeding seeking injunctive relief, to obtain damages with respect to such
breach or violation, to enforce the specific performance of Section 7 this
Agreement by Employee, or to enjoin Employee from engaging in any activity in
violation of Section 7 of this Agreement. Employee agrees that effective service
of process may be made upon Employee under the notice provisions contained in
Section 11 of this Agreement.

8.       

Termination. This Agreement may be terminated prior to the end of the Term as
set forth below:

(a)       

Resignation (other than for Good Reason). Employee may resign, including by
reason of retirement, his position at any time by providing written notice of
resignation to the Company in accordance with Section 11 hereof. In the event of
such resignation, except in the case of resignation for Good Reason (as defined
below), this Agreement shall terminate and Employee shall not be entitled to
further compensation pursuant to this Agreement other than payment for (i) any
unpaid Base Compensation or unpaid Bonus accrued hereunder as of Employee’s
employment termination date, and (ii) any unpaid reasonable business expenses
incurred prior to Employee’s employment termination date, subject to the
Company’s expense reimbursement rules and policies as in effect from time to
time (the “Accrued Amounts”). Accrued Amounts, if any, shall be paid to Employee
in accordance with the Company’s customary payroll practices as in effect from
time to time, but in no event later than fifteen (15) days following Employee’s
termination of employment.

(b)       

Death. If Employee’s employment is terminated due to his death, this Agreement
shall terminate and the Company shall have no obligations to Employee or his
estate, beneficiaries or legal representatives with respect to this Agreement
other than payment of the Accrued Amounts, if any. Accrued Amounts, if any,
shall be paid to Employee in accordance with the Company’s customary payroll
practices as in effect from time to time but in no event later than 15 days
following Employee’s termination of employment on account of death.
Notwithstanding the foregoing, in the event of his death, Employee shall be
considered as immediately and totally vested in any and all outstanding Awards
previously granted to Employee by Company or its subsidiaries; provided,
however, with respect to Awards that are deferred compensation subject to Code
Section 409A, such accelerated vesting shall not cause an acceleration of a
payment or result in a change in form of payment that would violate Code
Section 409A.

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(c)       

Discharge.

(i)       

The Company may terminate Employee’s employment in the event of Employee’s
Misconduct or Disability (both as defined below) only upon written notice
thereof delivered to Employee in accordance with Section 8(f) and Section 11
hereof. In the event that Employee’s employment is terminated during the Term by
the Company for any reason other than his Misconduct or Disability (both as
defined below), then, except as provided in Section 8(j)(i) below, (A) the
Company shall pay in lump sum in cash to Employee, within fifteen (15) days
following the expiration of the revocation period for the Release (as defined
below), but in no event later than the fifteenth (15th) day of the third month
following the year in which the Date of Termination occurs, an amount equal to
three years of the then Base Compensation owed to Employee, and (B) for six
months following the expiration of the revocation period for the Release, the
Company, at its cost, shall provide or arrange to provide Employee (and, as
applicable, Employee’s dependents) with accident and group health insurance
benefits substantially similar to those which Employee (and Employee’s
dependents) were receiving immediately prior to Employee’s termination (if any);
provided, however, the benefits otherwise receivable by Employee pursuant to
this clause (B) shall be reduced to the extent comparable benefits are actually
received by Employee (and/or Employee’s dependents) during such period under any
other employer’s plan(s) or program(s), with Employee being obligated to
promptly disclose to the Company any such comparable benefits; and provided,
further, however, that for the avoidance of doubt, the COBRA continuation period
shall run concurrently with the period set forth in this Clause (B). In addition
to the aforementioned compensation and benefits, Employee shall be considered as
immediately and totally vested in any and all Awards previously granted to
Employee by Company or its subsidiaries; provided, however, with respect to
Awards that are deferred compensation subject to Code Section 409A, such
accelerated vesting shall not cause an acceleration of a payment or result in a
change in form of payment that would violate Code Section 409A. With respect to
benefits set forth under Clause (B) above, all insurance premiums and/or
benefits payments made by the Company with respect to such benefits shall be
made so as to be exempt from Section 409A of the Code and, for purposes thereof,
and either each such payment shall be treated as a separate payment under
Section 409A of the Code, or such payments shall be treated as medical benefits
under a separation pay plan, as described under Treasury Regulation Section
1.409A-1(b)(9)(v)(B). To the extent any such payments are not exempt from
Section 409A of the Code (i.e., they constitute “nonqualified deferred
compensation” subject to Section 409A of the Code), such payments shall be paid
by the Company according to a fixed schedule consisting of monthly installment
payments. If the Company’s pre-tax payment of the premiums for such benefits
would cause the Executive to be taxed on the Company’s actual cost of providing
such accident and group health insurance benefits because such benefits are
“self-insured,” the Company will instead pay such premiums on an after-tax basis
so the premium amounts are included in the Employee’s taxable income. With
respect to any such benefits that are taxable and not otherwise excluded from
deferred compensation under Code Section 409A, any amount reimbursable and paid
in one tax year shall not affect the amount to be reimbursed or paid in another
tax year, all reimbursements shall be paid no later than the end of the
Executive’s taxable year following the tax year in which such expenses were
incurred and the reimbursements under this Section cannot be substituted for any
other benefit. The Company’s obligation to make the payments and provide the
benefits described in this Section 8(c)(i) is conditioned expressly on
Employee’s executing (and not revoking) a general release of any and all claims
arising out of or relating to Employee’s employment and termination of
employment in a form reasonably satisfactory to the Company and the Employee
(the “Release”). If Employee fails to execute a Release within forty-five
(45) days following the later of (i) the Date of Termination or (ii) the date
Employee actually receives an execution copy of such Release (which shall be
delivered to Employee no later than five (5) business days following Date of
Termination), or if Employee revokes such Release within seven (7) days
following execution, Employee shall forfeit all payments and benefits described
hereunder.

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(ii)       

In the event Employee is terminated because of Misconduct, the Company shall
have no obligations pursuant to this Agreement after the Date of Termination
other than for payment of the Accrued Amounts, if any. As used herein,
“Misconduct” means (A) the continued failure by Employee to substantially
perform his duties with the Company (other than any such failure resulting from
Employee’s incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination by Employee
for Good Reason), after a written demand for substantial performance is
delivered to Employee by the Board, which demand specifically identifies the
manner in which the Board believes that Employee has not substantially performed
his duties, and the Employee fails to cure such failure within fifteen (15) days
after receipt of such demand, (B) the engaging by Employee in conduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise
(other than such conduct resulting from Employee’s incapacity due to physical or
mental illness or any such actual or anticipated conduct after the issuance of a
Notice of Termination by Employee for Good Reason), (C) Employee’s conviction
for the commission of a felony or (D) action by Employee toward the Company
involving dishonesty. Anything contained in this Agreement to the contrary
notwithstanding, the Board shall have the sole power and authority to terminate
the employment of Employee on behalf of the Company.

(d)       

Disability. If Employee shall have been absent from the full-time performance of
Employee’s duties with the Company for ninety (90) consecutive calendar days as
a result of Employee’s incapacity due to physical or mental illness, Employee’s
employment may be terminated by the Company for “Disability” and Employee shall
not be entitled to further compensation pursuant to this Agreement, other than
for payment of the Accrued Amounts, if any. Notwithstanding the foregoing, in
the event that Employee’s employment is terminated by the Company due to
Disability, Employee shall be considered as immediately and totally vested in
any and all Awards previously granted to Employee by the Company or its
subsidiaries; provided, however, with respect to Awards that are deferred
compensation subject to Code Section 409A, such accelerated vesting shall not
cause an acceleration of a payment or result in a change in form of payment that
would violate Code Section 409A.

(e)       

Resignation for Good Reason. Employee shall be entitled to terminate his
employment for Good Reason as defined herein. If Employee terminates his
employment for Good Reason, he shall be entitled to the compensation and
benefits provided in Section 8(c)(i) hereof in accordance with the terms
therein, including, without limitation, the requirement that Employee execute
and not revoke the Release contemplated in Section 8(c)(i). “Good Reason” shall
mean the occurrence of any of the following circumstances without Employee’s
express written consent; provided, that, Employee has provided a Notice of
Termination to the Company within fifteen (15) days after the initial occurrence
of any such circumstance of Employee’s intention to terminate Employee’s
employment for Good Reason, and the Company has failed to cure, to the extent
curable, such circumstance within fifteen (15) days of receipt of the Notice of
Termination given in respect hereof:

(i)       

the material breach of any of the Company’s obligations under this Agreement
without Employee’s express written consent; or

(ii)       

the failure of the Company to obtain a satisfactory agreement from any successor
to assume and agree to perform this Agreement, as contemplated in Section 13
hereof.

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In addition, the occurrence of a Corporate Change, shall constitute “Good
Reason” hereunder, but only if Employee terminates his employment within ninety
(90) days following the effective date of such Corporate Change.

(f)       

Notice of Termination. Any purported termination of Employee’s employment by the
Company under Sections 8(c)(ii) (Misconduct) or 8(d) (Disability), or by
Employee under Section 8(e) (Good Reason), shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 11
hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which, if by the Company and is for Misconduct or Disability, shall set
forth in reasonable detail the reason for such termination of Employee’s
employment, or in the case of resignation by Employee for Good Reason, said
notice must specify in reasonable detail the basis for such resignation. A
Notice of Termination given by Employee pursuant to Section 8(e) shall be
effective even if given after the receipt by Employee of notice from the Board
to consider terminating Employee for Misconduct. Any purported termination for
which a Notice of Termination is required which is not effected pursuant to this
Section 8(f) shall not be effective.

(g)       

Date of Termination. “Date of Termination” shall mean the date specified in the
Notice of Termination, provided that the Date of Termination shall be at least
fifteen (15) days following the date the Notice of Termination is given;
provided, however, that in the case of Employee’s resignation for Good Reason,
Date of Termination shall mean the close of business on the last day on which
the Company may cure any circumstance alleged by Employee to give rise to a Good
Reason termination. Notwithstanding the foregoing, in the event Employee is
terminated for Misconduct, the Company may refuse to allow Employee access to
the Company’s offices (other than to allow Employee to collect his personal
belongings under the Company’s supervision) prior to the Date of Termination.
Notwithstanding anything herein to the contrary, for purposes of this Agreement,
“termination of employment” shall mean Employee’s “separation from service” from
the Company and its “affiliates” as defined in Code Section 409A and Final
Treasury Regulations Section 1.409A-1(h), including the default presumptions
thereof. For purposes of this Agreement, “affiliate” shall mean (i) any person
or entity that directly or indirectly controls, is controlled by or is under
common control with the Company and/or (ii) to the extent provided by the Board,
any person or entity in which the Company has a significant interest. The term
“control” (including, with correlative meaning, the terms “controlled by” and
“under common control with”), as applied to any person or entity, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or entity, whether
through the ownership of voting or other securities, by contract or otherwise;
provided, however, with respect to any payment or benefit subject to
Section 409A of the Code, the term “affiliate” shall mean any member of the
Company’s control group within the meaning of Final Treasury Regulations
Section 1.409A-1(h)(3), as such may be modified or amended from time to time, by
applying the “at least 50 percent” provisions thereof.

(h)       

Mitigation. Employee shall not be required to mitigate the amount of any payment
provided for in this Section 8 by seeking other employment or otherwise, nor
(except as set forth in Section 8(c)(i)(B)) shall the amount of any payment
provided for in this Agreement be reduced by any compensation earned or benefits
received by Employee as a result of employment by another employer, except that
any severance amounts payable to Employee pursuant to the Company’s severance
plan or policy for employees in general shall reduce the amount otherwise
payable pursuant to Sections 8(c)(i) or 8(e).

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(i)       

Excess Parachute Payments. Notwithstanding anything in this Agreement to the
contrary, to the extent that any payment or benefit received or to be received
by Employee hereunder in connection with the termination of Employee’s
employment would, as determined by tax counsel selected by the Company,
constitute an “Excess Parachute Payment” (as defined in Section 280G of the
Internal Revenue Code), the Company shall fully “gross-up” such payment so that
Employee is in the same “net” after-tax position he would have been if such
payment and gross-up payments had not constituted Excess Parachute Payments, and
such “gross-up” payment shall be made no later than the end of Employee’s
taxable year next following Employee’s taxable year in which he remits the taxes
to which such gross-up payment relates. The Company shall reimburse any costs
and expenses incurred by Employee, including without limitation, attorneys’ fees
due to a tax audit or litigation in connection with any excise tax (including
penalties and interest or other excise taxes thereon) under Code Section 4999 or
Code Section 280G and any such reimbursement shall be made by the end of the
Employee’s tax year following the tax year in which such taxes that are subject
to the audit or litigation are remitted to the taxing authority, or where as a
result of such audit or litigation no taxes are remitted, by the end of the
Employee’s tax year following the tax year in which the audit is completed or
there is a final nonappealable settlement or other resolution of the litigation.
The Employee’s right to payment or reimbursement pursuant to this Section 8(i)
shall not be subject to liquidation or exchange for any other benefit.

(j)       

Code Section 409A.

(i)       

Notwithstanding any provision of this Section 8 to the contrary, if all or any
portion of the benefits provided in this Section 8 is determined to be
“nonqualified deferred compensation” subject to Code Section 409A, and the
Company determines that Employee is a “specified employee” as defined in
Section 409A(a)(2)(B)(i) of the Code and the regulations and other guidance
issued thereunder, then such benefits (or portion thereof) shall be accumulated
and paid on the first day of the seventh month following Employee’s termination
of employment. For purposes of this Agreement, whether Employee is a “specified
employee” will be determined in accordance with the written procedures adopted
by the Board.

(ii)       

This Agreement is intended to comply with the provisions of Section 409A of the
Code, and shall be interpreted and construed accordingly. The Company shall have
the discretion and authority to amend this Agreement at any time to satisfy any
requirements of Code Section 409A or guidance published thereunder; provided,
however, any such amendment shall maintain the economic terms of this Agreement
for the Employee. However, in no event will the Company have any liability for
any failure of the Agreement to satisfy Code Section 409A, and the Company does
not guarantee that the Agreement complies with Code Section 409A.

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(iii)       

The Company shall promptly reimburse Employee for eligible expenses under this
Agreement that Employee incurs and properly reports to the Company in accordance
with its expense reimbursement rules and policies. Notwithstanding anything
herein to the contrary or otherwise, all reimbursements shall be made so as to
be exempt from Section 409A of the Code and to the extent not exempt: (A) the
amount of expenses eligible for reimbursement or in-kind benefits provided
during any calendar year will not affect the amount of expenses eligible for
reimbursement or in-kind benefits provided in any other calendar year; (B) the
reimbursements for expenses for which Employee is entitled to be reimbursed
shall be made on or before the last day of the calendar year following the
calendar year in which the applicable expense is incurred; and (C) the right to
payment or reimbursement or in-kind benefits hereunder may not be liquidated or
exchanged for any other benefit.

9.       

Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
Employee’s continuing or future participation in any benefit, bonus, incentive,
or other plan or program provided by the Company or any of its affiliated
companies and for which Employee may qualify, nor shall anything herein limit or
otherwise adversely affect such rights as Employee may have under any Awards
with the Company or any of its affiliated companies.

10.       

Assignability. The obligations of Employee hereunder are personal and may not be
assigned or delegated by him or transferred in any manner whatsoever, nor are
such obligations subject to involuntary alienation, assignment or transfer. The
Company shall have the right to assign this Agreement and to delegate all
rights, duties and obligations hereunder, either in whole or in part, to any
parent, affiliate, successor or subsidiary organization or company of the
Company, so long as the obligations of the Company under this Agreement remain
the obligations of the Company.

11.       

Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given upon satisfaction of both (i) and (ii) set forth below: (i) via
email to the email address on the signature page hereof and (ii) via mail when
delivered or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed to the Company at its principal office address,
directed to the attention of the Board with a copy to the Secretary of the
Company, and to Employee at Employee’s residence address on the records of the
Company or to such other address as either party may have furnished to the other
in writing in accordance herewith except that notice of change of address shall
be effective only upon receipt.

12.       

Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

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13.       

Successors; Binding Agreement.

(a)       

The Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Employee to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used herein, the term “Company” shall include any successor to its business
and/or assets as aforesaid which executes and delivers the Agreement provided
for in this Section 13 or which otherwise becomes bound by all terms and
provisions of this Agreement by operation of law.

(b)       

This Agreement and all rights of Employee hereunder shall inure to the benefit
of and be enforceable by Employee’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Employee should die while any amounts would be payable to him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Employee’s devisee, legatee, or other designee or, if there be no such designee,
to Employee’s estate.

14.       

Withholding Taxes.

(a)       

Tax Withholding. The Company shall have the power and the right to deduct or
withhold from any benefits payable under this Agreement an amount sufficient to
satisfy federal, state, and local taxes, domestic or foreign, required by law or
regulation to be withheld.

(b)       

Share Withholding. With respect to tax withholding required upon the upon the
lapse of restrictions on any restricted common stock, or upon any other taxable
event arising as a result of any stock awards pursuant to this Agreement,
Employee may elect, to satisfy the withholding requirement, in whole or in part,
by having the Company withhold shares having a fair market value on the date the
tax is to be determined equal to the minimum statutory total tax which could be
imposed on the transaction. All such elections shall be made in writing, signed
by the Employee, and shall be subject to any restrictions or limitations that
the Company, in its discretion, deems appropriate. Any fraction of a share
required to satisfy such obligation shall be disregarded and the Employee shall
instead pay the amount due in cash.

15.       

No Restraints. As an inducement to the Company to enter into this Agreement,
Employee represents and warrants that he is not a party to any other agreement
or obligation for personal services, and that there exist no impediments or
restraints, contractual or otherwise, on Employee’s powers right or ability to
enter into this Agreement and to perform his duties and obligations hereunder.

16.       

Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by Employee and such officer as may be specifically authorized by the
Board. No waiver by either party hereto at any time of any breach by the other
party hereto of, or in compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement is an integration of the parties’ agreement; no
agreement or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party, except
those which are set forth expressly in this Agreement. THE VALIDITY,
INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF TEXAS.

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17.       

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

18.       

Arbitration. Either party may elect that any dispute or controversy arising
under or in connection with this Agreement be settled by arbitration in Houston,
Texas in accordance with the Employment Rules of the American Arbitration
Association then in effect. If the parties cannot mutually agree on an
arbitrator, then the arbitration shall be conducted by a three arbitrator panel,
with each party selecting one arbitrator and the two arbitrators so selected
selecting a third arbitrator. The findings of the arbitrator(s) shall be final
and binding, and judgment may be entered thereon in any court having
jurisdiction. The findings of the arbitrator(s) shall not be subject to appeal
to any court, except as otherwise provided by applicable law. The arbitrator(s)
may, in his or her (or their) own discretion, award legal fees and costs to the
prevailing party.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.

TEXAS SOUTH ENERGY, INC.

By:      /s/     James Askew Name: James M. Askew Office:    Chief Executive
Officer Email address: jaskew@asconnenergy.com      MICHAEL J. MAYELL
     /s/     Michael Mayell Email address: mmayell@sydson.com

 

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