Blueprint






Exhibit 10.1







AMENDED AND RESTATED EMPLOYMENT AGREEMENT


 



April 20, 2017


 


 


This
Amended and Restated Employment Agreement (this “Agreement”) is entered into by
and between YUMA ENERGY,
INC., a Delaware
corporation (the “Company”), and Sam L. Banks (the “Employee”) as of the date first
set forth above (the “Effective Date”) on the terms set
forth herein.


 



WHEREAS, The Yuma Companies, Inc., a Delaware corporation
(“TYC”), and
the Employee previously entered into an employment agreement dated
October 1, 2012 (the
“TYC Employment
Agreement”);


 



WHEREAS, Yuma Energy, Inc., California corporation
(“Yuma
California”), assumed obligations under the TYC
Employment Agreement as part of the closing of a merger on
September 10, 2014; and


 



WHEREAS, the Company assumed the TYC Employment Agreement as
part of the closing of the merger on October 26, 2016;
and


 



WHEREAS, the Company and the Employee amended the TYC
Employment Agreement on October 26, 2016 (as amended, the
“Original Employment
Agreement”); and


 



WHEREAS, the Company and the Employee desire to amend and
restate the Original Employment Agreement on the terms and
conditions set forth herein.


 



NOW THEREFORE, the parties, intending to be legally bound,
agree as follows:


 



1.            

Position
and Duties.






 



1.1            

Employment; Titles; Reporting.
The Company agrees to continue to employ the Employee and the
Employee agrees to continue employment 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 Employee
will serve the Company as member of the Board and Chief Executive
Officer. In such capacity, the Employee will report to the Board
and otherwise will 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 Employee 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 Employee 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 Employee 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
Employee 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 obligations to the Company
under this Agreement.






 



1.3            

Place of Employment. The
Employee will perform his duties under this Agreement at the
Company’s offices in Houston, Texas, with the likelihood of
business travel from time to time.






 



2.            

Term
of Employment.






 


The
term of the Employee’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 Employee’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 Employee 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.


 



 

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3.            

Compensation.






 



3.1            

Base Salary. During the
Employment Term, the Employee will be entitled to receive a base
salary (“Base
Salary”) at an annual rate of not less than $525,000
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 Employee’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.
During the Employment Term, the Employee shall have the opportunity
to earn incentive compensation in the form of an annual bonus
target equal to 100% of Base Salary, as in effect at the beginning
of the applicable calendar year, based on the achievement of
performance goals established by the Board in its sole discretion
under any incentive compensation or other bonus plan or arrangement
as may be established by the Board from time to time (collectively,
the “Employee Bonus
Plan”). Under the Employee Bonus Plan, the Board may,
in its discretion, set, in advance, an annual target bonus for the
Employee. The percentage of the Employee’s Base Salary that
the Board designates for the Employee to receive as his annual
target bonus under any Employee Bonus Plan, as such percentage may
be adjusted upward or downward from time to time in the sole
discretion of the Board, or replaced by another methodology of
determining Employee’s target bonus, is referred to herein as
the Employee’s “Bonus
Level Percentage.” The amount paid to the Employee
through application of the Bonus Level Percentage is the
Employee’s “Bonus
Level Amount.” The “Annual Bonus” is the Bonus Level
Amount paid to the Employee in any given year. The Annual Bonus, if
any, will be paid within two and one-half (2.5) months after the
end of the applicable calendar year. Except as otherwise provided
in Section 6, (i) the Annual Bonus will be subject to the terms of
the Employee Bonus Plan under which it is granted and (ii) in order
to be eligible to receive an Annual Bonus, the Employee must 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, the Employee shall be
eligible to receive annual long-term equity incentive awards under
the Company’s 2014 Long-Term Incentive Plan (the
“Plan”) or any
successor plan, with a target value of no less than 400% of Base
Salary (based on the grant date value of any such award). 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 similarly situated executive
officers of the Company.






 



4.            

Expenses
and Other Benefits.






 



4.1            

Reimbursement of Expenses. The
Employee 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; provided that the Employee 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 Employee 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 Employee
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 Employee may not liquidate or
exchange the right to reimbursement of such expenses for any other
benefits.






 



4.2            

Vacation. The Employee 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.






 



 

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4.3            

Other Employee Benefits. In
addition to the foregoing, during the Employment Term, the Employee
will be entitled to participate in and to receive benefits as a
senior executive under all of the Company’s employee 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.






 



4.4            

Overriding Royalty Interest
Plan. Any overriding royalty interest (“ORRI”) granted to the Employee on
either a lease or a well prior to the Effective Date pursuant to
the Company’s Overriding Royalty Interest Plan dated November
7, 2013 and as amended in 2014 (the “ORRI Plan”) and/or the Original
Employment Agreement shall be fully vested as of the Effective
Date. After the Effective Date, the Employee shall not be entitled
to any grants of an ORRI pursuant to the ORRI Plan.






 



5.            

Termination
of Employment.






 



5.1            

Death. The Employee’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 Employee’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 Employee’s employment under this Agreement by
reason of any of the following:


 


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


 


(iii)
the Employee’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
Employee;


 


(v) the
Employee’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 Employee’s willful and intentional material breach of
this Agreement;


 


(vii)
the Employee’s material failure to follow or comply with the
reasonable and lawful written directives of the Board;
or


 


(viii)
conduct constituting a material breach by the Employee 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 Employee knew or should have known such
conduct to be a breach.


 


(c)           Notice
and Cure Opportunity in Certain Circumstances. The Employee
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 Employee 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 Employee 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 Employee 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 Employee will have an
opportunity to cure, the Company shall provide an opportunity for
the Employee to be heard by the Board or a Board committee
designated by the Board to hear the Employee. The decision as to
whether the Employee 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
Employee.






 


(a)           
Terminable at Will. The
Employee 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 Employee will give the Company written notice, which
will identify with reasonable specificity the grounds for the
Employee’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 Employee to
the Company more than ninety (90) days after the occurrence of the
event that the Employee 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
Employee will not consent in writing: (i) a material reduction of
the Employee’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 Employee 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
Employee’s title, authority or responsibilities as set forth
in this Agreement; or (v) a relocation of the Employee’s
primary place of employment to a location more than fifty (50)
miles from the Company’s location in Houston, Texas at the
Effective Date.


 


(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 Employee will not consent in writing, but
only if the Termination Date is within six (6) months before or
eighteen (18) months after a Change of Control: (i) a material
reduction in either the Employee’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 Employee 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 Employee’s
title, authority or responsibilities as set forth in this
Agreement; or (v) a relocation of the Employee’s primary
place of employment to a location more than fifty (50) miles from
the Company’s principal office location in Houston, Texas on
the day immediately preceding the Change of Control.


 



5.4            

Notice of Termination. Any
termination of the Employee’s employment by the Company or by
the Employee 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
Employee’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 Employee has occurred during the Employment Term, it may,
without breaching this Agreement, give to the Employee written
notice in accordance with Section 5.4 of its intention to terminate
the Employee’s employment. In such event, the
Employee’s employment with the Company will terminate
effective on the fifteenth (15th) day after receipt of such notice
by the Employee, provided that, within the fifteen (15) days after
such receipt, the Employee will not have returned to full-time
performance of the Employee’s duties.






 



 

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“Disability”
means the Employee 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 and from time to time, upon reasonable request therefor by the
Company, the Employee 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 Employee Upon
Termination. Subject to the provisions of Sections 6.4(d),
6.7 and 6.8, the Employee shall be entitled to receive the amount
specified upon the termination events designated
below:






 



6.1            

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






 


(a)           
the Employee’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 Employee was employed by the Company
determined as follows:


 


(i)           If
the Employee 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 Employee would have been awarded 100% of his Bonus Level
Percentage for that year (the “Deemed Full Year Bonus
Amount”);


 


or


 


(ii)           
If the Employee 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 Employee 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


 


(iii)           
an amount representing a deemed bonus for the fiscal year in which
the Termination Date occurs, which is equal to the Bonus Level
Amount that would be received by the Employee if the
Company’s performance for the year is deemed to be at the
level entitling the Employee to 100% of his Bonus Level Percentage
and then multiplying the Bonus Level Amount resulting from applying
100% of his Bonus Level Percentage by a fraction, the numerator of
which is the number of days from the first day of the fiscal year
of the Company in which such termination occurs through and
including the Termination Date and the denominator of which is 365
(“Deemed Pro Rata Bonus
Amount”);


 



plus


 


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


 



 

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For a
period of up to thirty-six (36) months following the termination of
this Agreement by reason of Employee’s death,
Employee’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, Employee’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.


 


Subject
to the provisions of this Section 6.1, the Company shall pay to the
Employee or his estate, in accordance with the Company’s
regular payroll practices, the Employee’s Base Salary (as in
effect on the Termination Date) for twelve (12) months after such
Termination Date. Thereafter, the Company will have no further
obligation to the Employee 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.


 



6.2            

Disability. In the event of the
Employee’s termination by reason of Disability pursuant to
Section 5.5, the Employee 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 Employee under any
Company disability policy or program funded by the Company, and the
Company shall pay the Employee the following amounts in a lump sum
within thirty (30) days following the Termination Date: the sum of
(a) the Employee’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) the Employee’s Deemed Pro Rata Bonus Amount, plus (d) any other amounts that may be
reimbursable by the Company to the Employee as expressly provided
under this Agreement. Subject to the provisions of this Section
6.2, the Company shall pay to the Employee or his estate, in
accordance with the Company’s regular payroll practices, the
Employee’s Base Salary (as in effect on the Termination Date)
for twelve (12) months after such Termination Date. Thereafter, the
Company will have no further obligation to the Employee 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
Employee Without Good Reason. If the Employee’s
employment is terminated by the Company for Cause, or if the
Employee terminates his employment other than for Good Reason, the
Employee will receive (a) the Employee’s accrued but unpaid
then current Base Salary through the Termination Date, payable in a
lump sum within thirty (30) days following the Termination Date,
and (b) any other amounts that may be reimbursable by the Company
to the Employee 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 Employee 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, no bonus will be paid to the
Employee for a termination of his employment under this Section
6.3.






 



6.4            

By the Employee 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 eighteen (18) months after the occurrence of a
Change of Control (as defined below) the Company terminates the
Employee’s employment without Cause, or the Employee
terminates his employment for Good Reason, then the Employee will
be entitled to the following benefits (the “Severance Benefits”) payable in a
lump sum within thirty (30) days following the Termination
Date:


 


(i)           an
amount equal to (A) the Employee’s accrued but unpaid then
current Base Salary through the Termination Date, plus (B) either (x) the unpaid Actual
Full Year Bonus Amount, if any, or (y) the Deemed Full Year Bonus
Amount, if applicable, plus
(C) the Employee’s Deemed Pro Rata Bonus Amount, if any,
plus (D) any other amounts
that may be reimbursable by the Company to the Employee as
expressly provided under this Agreement;


 



 

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plus


 


(ii)           with
respect to any termination event described in this paragraph (a) of
Section 6.4, a single lump sum equal to two (2) times the sum of
(A) the Employee’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 plus (B) the Employee’s target
bonus for the year of the Termination Date, payable in a single
lump sum within thirty (30) days following the Termination
Date.


 


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


 


(iv)           
If the Employee 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 Employee 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 Employee (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 Employee 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) may be discontinued
by the Company prior to the end of the period provided in this
subsection to the extent, but only to the extent, that the Employee
receives substantially similar benefits from a subsequent
employer.


 


(v)           
Following the end of the COBRA “maximum required
period” provided under the Company’s group health plan
(the “Benefit Measurement
Date”), the Company shall, as a separate obligation,
reimburse the Employee for any medical premium expenses incurred to
purchase the Medical Benefits under the preceding Section
6.4(a)(iv), but only to the extent such expenses constitute the
“Company’s
portion” of the premiums for continued Medical
Benefits (which amount shall be referred to herein as the
“Medical
Reimbursement”).


 


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.


 


The
premiums available for Medical Reimbursement under Section
6.4(a)(v) in any calendar year will not be increased or decreased
to reflect the amount actually reimbursed in a prior or subsequent
calendar year, and all Medical Reimbursements under this paragraph
will be paid to the Employee within thirty (30) days following the
Company’s receipt of a premium payment for Medical
Benefits.


 


(b)           Change
of Control Benefits. Subject to the provisions of Section
6.4(d), if a Change of Control has occurred and the
Employee’s employment was terminated by the Company without
Cause, or by the Employee 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 eighteen (18) months following the
Change of Control (an “Eligible Termination”), then in
lieu of the Severance Benefits under Section 6.4(a), the Employee
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) and (a)(ii)
except that the amount described in Section 6.4(a)(ii) will be
equal to three (3) times the sum of (A) the Employee’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 plus (B) the
Employee’s target bonus for the year of the Termination Date;
provided, however, that if the Termination Date preceded the Change
of Control, then the Change of Control Benefits will be payable
within the later of thirty (30) days following the Termination Date
and thirty (30) days following the Change of Control.


 



 

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(ii)           The
Company will pay the same COBRA Coverage described in Sections
6.4(a)(iv) and (v). Notwithstanding the foregoing, the benefits
described in this Section 6.4(b)(ii) may be discontinued by the
Company prior to the end of the period provided in this subsection
(ii) to the extent, but only to the extent, that the Employee
receives substantially similar benefits from a subsequent
employer.


 


(iii)           All
stock appreciation rights and other incentive awards held by the
Employee will become fully vested and immediately exercisable and
all restrictions on any restricted stock held by the Employee 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
Employee will be entitled will be the difference between the
Severance Benefits already paid to the Employee, 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;


 


(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


 



 

8







 






 


(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 Employee may otherwise be entitled
under Section 6.4(a) or Section 6.4(b), the Employee will execute a
release (the “Release”), which will include an
affirmation of the restrictive covenants set forth in Section 7 and
a non-disparagement provision, in a form and substance satisfactory
to the Company and the Employee, 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 Employee
for signature within ten (10) days after the Termination Date. If
the Company has provided the Release to the Employee for signature
within ten (10) days after the Termination Date and if the Employee
fails or otherwise refuses to execute the Release within a
reasonable time after the Company has provided the Release to the
Employee, and, in all events no later than sixty (60) days after
the Termination Date and prior to the date on which such benefits
are to be first paid to him, the Employee 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 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 Employee under this
Agreement.


 


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


 



6.5            

Severance Benefits Not Includable for
Employee 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 Employee’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.






 



 

9







 






 



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 Employee in connection
with a Change of Control or the termination of the Employee’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
Employee of the Total Payments after payment of the Excise Tax to
(ii) the After-Tax Value to the Employee 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 Employee and subject to the
reasonable right of Employee’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
Employee’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.






 



6.8            

Code Section 409A
Matters.






 

(a) It is the intention
of the Company and Employee that the payments, benefits and rights
to which Employee 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 Employee
to incur any additional tax, interest or penalty under Section 409A
of the Code, the Company and Employee 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 Employee 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 Employee 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.


 



 

10







 






 

(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 Employee’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
Employee’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
Employee 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
Employee 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.


 



7.            

Restrictive
Covenants.






 



7.1            

Confidential Information. The
Employee 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 Employee or otherwise has been or is
made available to him) regarding the business and operations of the
Company and its subsidiaries or affiliates. The Employee 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 Employee 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 Employee 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 Employee will hold in the strictest
confidence all Confidential Information, and will not, both during
the Employment Term and for a period of two (2) years 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 Employee 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 Employee or his agent or other
representative or becomes available to the Employee on a
non-confidential basis from a source other than the Company or its
direct or indirect subsidiaries. Further, the Employee 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
Employee promptly will provide the Company with notice of such
requirement, so that the Company may seek an appropriate protective
order. Employee understands that nothing contained in this
Agreement limits Employee’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”). Employee further understands that this
Agreement does not limit Employee’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
Employee’s right to receive an award for information provided
to any Government Agencies.






 



 

11







 






 



7.2            

Return of Property. Employee
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 Employee will be
permitted to retain copies of any documents or materials of a
personal nature or otherwise related to the Employee’s rights
under this Agreement, copies of this Agreement and any attendant or
ancillary documents.






 



7.3            

Non-Compete
Obligations.






 


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


 


(i)           the
Employee will not, other than through the Company, engage or
participate in any manner, whether directly or indirectly through
any family member 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, in any business or activity
which is engaged in leasing, acquiring, exploring, producing,
gathering or marketing hydrocarbons and related products; provided
that the foregoing shall not be deemed to restrain the
participation by the Employee’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 Employee’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
Employee’s spouse in any such competitive business or
activity; and


 


(ii)           all
investments made by the Employee (whether in his own name or in the
name of any family members or other nominees or made by the
Employee’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 Employee 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 Employee 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 Employee has no active
role with respect to any investment by such fund in any
entity.


 



 

12







 






 


(b)           Non-Compete
Obligations After Termination Date. The Employee agrees that
the Employee 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; provided, however, such period shall be
twenty-four (24) months if Employee received Severance Benefits
pursuant to Section 6.4(a), in any business or activity which is in
direct competition with the business of the Company or its direct
or indirect subsidiaries in the leasing, acquiring, exploring,
producing, gathering or marketing of hydrocarbons and related
products 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 Employee 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
Employee 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
Employee 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 Employee’s spouse in any
capacity set forth above in any business or activity described
above.


 


(c)           Not
Applicable Following Change of Control Termination. The
Employee will not be subject to the covenants contained in Section
7.3(b) and such covenants will not be enforceable against the
Employee from and after the date of an Eligible Termination if such
Eligible Termination occurs within six (6) months before or
eighteen (18) 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 for a period of one (1) year following the
Termination Date; provided, however, such period shall be
twenty-four (24) months if Employee received Severance Benefits
pursuant to Section 6.4(a), the Employee 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
Employee will not be subject to the covenants contained in Section
7.4(a) and such covenants will not be enforceable against the
Employee from and after the date of an Eligible Termination if such
Eligible Termination occurs within six (6) months before or
eighteen (18) months following a Change of Control.


 



7.5            

Assignment of Developments. The
Employee assigns and agrees to assign without further compensation
to the Company and its successors, assigns or designees, all of the
Employee’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
Employee during the Employment Term, or originated by any third
party and brought to the attention of the Employee 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).


 



 

13







 






 


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 Employee 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 Employee
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
Employee’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 Employee
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
Employee 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 and when any such covenant
or restriction 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 or restriction 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.






 



7.8            

Forfeiture
Provision.






 


(a)           Detrimental
Activities. If the Employee 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 Employee 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 Employee will terminate effective as of
the date on which the Employee 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 Employee 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 Employee engaged in that
activity. In the event of any such rescission, the Employee 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 Employee consents to a deduction from any
amounts the Company owes the Employee 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 Employee by
the Company), to the extent of the amounts the Employee 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 Employee owes,
calculated as set forth above, the Employee 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 Employee 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 Employee all Severance Benefits or Change of Control
Benefits due under this Agreement, then Company shall forfeit all
right to enforce this Section 7.


 



 

14







 






 



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 Employee 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 Employee 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.






 



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 Employee is party or any other
award agreement between the Company and the Employee, 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 Employee arising out of or relating to the
interpretation, application or enforcement of the provisions of
this Agreement, the Company and the Employee agree and consent to
the personal jurisdiction of the state and local courts of 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 Employee 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 Employee at his last known address as reflected in the
Company’s records.


 


(b)           Waiver
of Right to Jury Trial.


 


THE
COMPANY AND THE EMPLOYEE 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 EMPLOYEE’S EMPLOYMENT WITH THE
COMPANY OR TERMINATION THEREFROM INCLUDING, BUT NOT LIMITED
TO:


 



 

15







 






 


(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.






 



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, or
(c) 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:


 


Yuma
Energy, Inc.


Attention:
Chief Executive Officer


1177
West Loop South, Suite 1825


Houston,
Texas 77027


 


to the
Employee:


 


The
address of the Employee on file with the Company.


 


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
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).






 



 

16







 






 



8.12            

Capacity; No Conflicts. The
Employee 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.
Employee warrants and represents that he has actual authority to
enter into this Agreement as the authorized act of the indicated
entities.






 


[Signature
Page Follows]


 



17








 






 


IN WITNESS WHEREOF, the parties have
duly executed this Agreement as of the date first written
above.


 


 



YUMA ENERGY, INC.:


 


 


By:
/s/ Paul D.
McKinney


Name:
Paul D. McKinney


Title:
President & Chief Operating Officer


 


 


 



EMPLOYEE:


 


 



/s/ Sam L. Banks


Sam L.
Banks


 



18