exv4w6






Exhibit 4.6




LEGACY ENERGY, INC.




EMPLOYMENT AGREEMENT



Clarence Cottman III



     This Employment Agreement (the “Agreement”) is entered into as of April 29, 2008 and
between Legacy Energy, Inc., a Delaware corporation (“Company”), and Clarence Cottman III
(“Executive”).



     In consideration of the promises below, the parties agree as follows.



     1. Title. Executive shall hold the title of President or such other position or
positions as the Board of Directors determines from time-to-time.



     2. Duties.



          2.1. General Duties. Executive shall undertake and render services as may from
time-to-time be assigned to him by the Board of Directors or their designees. The duties shall be
reasonably consistent with Executive’s experiences and shall include overall control and
responsibility for the company’s activities, reporting directly to the Board of Directors.




          2.2. Outside Activities. Executive shall devote his full time to the performance of
his duties, and agrees that his first duty of loyalty is to the Company and shall locate in
Carpinteria, California. Except with the express written consent of the Board of Directors,
Executive shall not, directly or indirectly, alone or as a member of any partnership, or as an
officer, director or employee of any other corporation, partnership or other organization, be
actively engaged in any other duties or pursuits which interfere or compete with the performance of
his duties under this Agreement. The following activities are specifically permitted and agreed
to: Vice Chairman and Director of PetroFalcon Corp.; Consultant — Vantage Marketplace; and
Advisory Board of Nanes Delorme Value Fund.




     3. Term. This Agreement shall commence on January 1, 2008 and continue in force for
three (3) years, until December 31, 2011, (the “Employment Period”) unless sooner terminated by
either party pursuant to Section 5 or Section 6 of this Agreement.



     4. Compensation. As payment in full for services rendered to Company, Executive shall
be entitled to receive from Company, and Company shall pay to Executive, salary and benefits as
follows.



          4.1 Salary. Company shall initially pay to Executive base salary at a rate of
$200,000.00 per annum, from January 1, 2008 through December 31, 2008 (“Base Salary”) payable
bi-weekly or at such other time or times as Company may allow or provide to other similarly
situated employees in accordance with policies adopted from time-to-time by the Board of Directors.
Base Salary for any partial period of employment shall be prorated. All compensation shall be
subject to deductions or withholding for taxes. Executive’s salary shall be renewed annually by
the Board of Directors or the Compensation






 









 







Committee thereof not later than November 30th of each year. In no event shall the Base Salary, as
adjusted, be decreased during the term.




          4.2 Fringe Benefits. Executive shall be entitled to annual vacation of four (4) weeks
per year and to receive employee and fringe benefits including but not limited to any compensation
plan such as stock options, restricted stock or stock purchase plan or any employee benefit plan
such as a thrift, pension, profit sharing, medical disability, the Company’s health plan at the
Company’s cost (with the right to include his family at the Company’s cost) (the Company’s “Plans”)
as Company may allow or provide to other similarly situated employees in accordance with policies
adopted from time-to-time by the Board of Directors.




          4.3 Expense Reimbursement. Company shall: (a) reimburse Executive for expenses
necessarily and reasonably incurred by him for travel and entertainment which amounts shall be
consistent with the size and profitability of the Company and within the amounts budgeted for such
expenses. Executive shall submit such proofs of expense for which reimbursement is claimed in
writing as the Company may reasonably require.




          4.4 Holidays. Executive shall be entitled to holidays recognized as State and/or
National holidays and as Company may allow or provide in accordance with policies adopted from
time-to-time by the Board of Directors.




          4.5 Office Location. Executive’s primary office shall be at the Company’s main
headquarters. Executive may, at his discretion, work outside of the office at any location for up
to four (4) months per calendar year. Company shall provide such equipment and services as are
necessary for Executive to provide services to the Company for a remote location.




     5. Termination of Employment. The following provisions shall apply in the event of
termination of Executive’s employment for any reason other than a termination that occurs
concurrent with or subsequent to a Change in Control as defined in Section 6.1.




          5.1. Right to Terminate by Company. Company may terminate Executive’s employment,
through its Board of Directors, without cause upon thirty (30) days’ written Notice of Termination
(as defined in Section 7.1 of this Agreement) or immediately upon Notice of Termination for Cause.
The term “Cause” when referring to termination by Company means only the following and any other
termination shall be without Cause: (i) Executive’s willful gross dereliction of his duties; or
(ii) Executive’s commission of an act that is adverse to, or not in the best interest of, or the
reputation of the Company; or (iii) Executive’s willful refusal to carry out the duties and
responsibilities of the President of the Company as reasonably requested by the Board of Directors;
or (iv) fraud, theft or misappropriation of any property of Company by Executive; or (v) conviction
of Executive of a felony or of any crime involving dishonesty or moral turpitude; or (vi) violation
by Executive of the provisions of this Agreement, provided that, termination for violation by
Executive of the provisions of this Agreement shall occur only after sixty (60) days’ advance
written notice by Company to Executive containing reasonably specific details of the alleged breach
failure of Executive to cure the same within such sixty (60) day period, if a cure is reasonable.




          5.2. Termination for Death or Disability. Executive’s employment shall terminate upon
the earliest of the events specified below:







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          (i) the death of Executive;




          (ii) the Date of Termination (as defined in Section 7.2) specified in a written Notice of
Termination by reason of physical or mental condition of Executive which shall substantially
incapacitate him from performing his principal duties (“Disability”) delivered by the Company to
Executive at least thirty (30) days prior to the specified Date of Termination, which shall be any
date after the expiration of any one hundred twenty (120) consecutive days during all of which
Executive shall be unable, by reason of his Disability, to perform his principal duties, provided
however, that such Notice of Termination shall be null and void if Executive fully resumes the
performance of his duties under this Agreement prior to the Date of Termination set forth in the
Notice of Termination.




          5.3. Right to Terminate by Executive. Executive may terminate his employment for
any reason upon thirty (30) days’ written Notice of Termination, including the payment of money or
material breach by the Company of its obligations under this Agreement, and only after thirty (30)
days’ advance written notice of Termination containing reasonably specific details of the alleged
breach and failure by the Company to cure the same within such thirty (30) day period. Executive
may terminate his employment with the Company at any time upon thirty (30) days written Notice of
Termination for “Good Reason” as defined in Section 6.4 (iii).




          5.4. Results of Termination by Company.




          (i) Termination for Cause. On the Date of Termination for Cause of Executive’s
employment by Company, Company shall pay the Base Salary then in effect through the Date of
Termination.




          (ii) Termination Without Cause. On the Date of Termination by the Company of
Executive’s employment, the Company shall pay Executive his Base Salary then in effect throughout
the Employment Period, but in no event less than one (1) year’s Base Salary then in effect.




          5.5. Results of Termination for Death or Disability.




          (i) Death of Executive. If Executive’s employment is terminated due to the death of
Executive, Company shall pay the Base salary due Executive through the date on which death occurs;




          (ii) Disability of Executive. If Executive’s employment is terminated due to the
disability of Executive as described in Section 5.2 (ii) of this of this Agreement, Company shall
continue to pay Executive his Base Salary for the ninety (90) day period following the specified
Date of Termination. After this ninety (90) period, Company agrees to pay to Executive during each
month for the next six months an amount equal to the difference between Executive’s monthly Base
Salary and the amount which Executive receives or is entitled to receive from any long term
disability insurance coverage provided for Executive by Company. If Executive’s disability occurs
in the course of his duties hereunder due to accident or injury, Executive shall receive his Base
Salary and fringe benefits throughout the remaining Employment Period. In addition, the Company
shall maintain in full force and effect, for the continued benefit of Executive and Executive’s
dependents for a period






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terminating on the earliest of (a) the expiration of the Employment Period or (b) the
commencement date of equivalent benefits from a new employer, all life, accidental death, medical
and dental insurance plans or programs in which Executive was entitled to participate immediately
prior to the Date of Termination, provided that Executive’s continued participation is possible
under the general terms and provisions of such plans and Executive continues to pay an amount equal
to his regular contribution for such participation, if any.




          5.6. Results of Termination by Executive. Upon Executive’s termination of his
employment as provided in Section 5.3, the Company shall make the same payments to Executive
through the Date of Termination as Company would be obligated to make under Section 5.4 (ii). Upon
termination by Executive for Good Reason, Executive shall be entitled to receive the payments and
benefits as provided in Section 6.5 (iii).




          5.7. Other Company Policies. Upon termination of Executive’s employment for any
reason, Executive will be entitled to any additional rights pursuant to policies of Company
regarding employment termination established by the Board of Directors from time-to-time.




          5.8. Termination of Company’s Obligation. If at any time within the twenty-four (24)
month period following termination of Executive’s employment without Cause by Company, pursuant to
Section 5.1 of this Agreement, Executive breaches any of his obligations under Sections 8, 9, 10,
11 and/or 12 of this Agreement, then Company’s obligation to make payments under Section 5.4 (ii)
of this Agreement shall cease as of the date such breach occurs.




     6. Change in Control



          6.1. Change in Control and Proposed Change in Control Defined.




          (i) No benefits shall be payable to Executive pursuant to this Section 6 unless there has been
a Change in Control of the Company as set for the below. For purposes of this Agreement a “Change
in Control” shall mean a Change in Control of Company of a nature that would be required to be
reported in response to Item 1 (a) of the Current Report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”); provided that, without limitation, such a Change in Control shall be deemed to
have occurred at such time as:





          (a) any Person, as such term is used in Section 13 (d) and 14 (d) of the Exchange Act
(other than Company, any trustee or other fiduciary holding securities under an employee
benefit plan of Company, or any company owned, directly or indirectly, by the stockholders
of Company in substantially the same proportions as their ownership of stock of Company) is
or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 25% or more of the combined voting power of Company’s outstanding
securities;




          (b) individuals who constitute the Board on the date hereof (the “Incumbent Board”)
cease for any reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose



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election, or nomination for election by Company’s shareholders, was approved by a vote
of at least a majority of the directors comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of Company in which such person is named as a
nominee for director, without objection to such nomination) shall be, for purposes of this
clause (b), considered as though such person were a member of the Incumbent Board.




          (c) the stockholders of Company approve a merger or consolidation of Company with any
other company, other than (1) a merger or consolidation which would result in the voting
securities of Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding by or being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the voting securities
of Company or such surviving entity outstanding immediately after such merger or
consolidation; or (2) a merger or consolidation effected to implement a recapitalization of
Company (or similar transition) in which no “Person” (as defined above) acquires more than
fifty percent (50%) of the combined voting power of the Company’s then outstanding
securities; or




          (d) the stockholders of Company approve a plan of complete liquidation of Company or an
agreement for the sale or disposition by Company of all or substantially all of Company’s
assets.



     Notwithstanding anything in the foregoing to the contrary, no Change in Control shall be
deemed to have occurred for purposes of this Agreement by virtue of any transaction which results
in Executive, or a group of Persons which includes Executive, acquiring, directly or indirectly,
50% or more of the combined voting power of the Company’s outstanding securities.



          (ii) For purposes of this Agreement, a “Proposed Change in Control” of Company shall be deemed
to have occurred if:





          (a) Company enters in an agreement, the consummation of which would result in the
occurrence of a Change in Control of Company;




          (b) any person (including Company) publicly announces an intention to take or to
consider taking actions which if consummated would constitute a change in Control of
Company;




          (c) any person (other than a trustee or other fiduciary holding securities under an
employee benefit plan of Company, or a company owned, directly or indirectly, by the
stockholders of Company in substantially the same proportions as their ownership of stock of
Company), who is or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing twenty-five percent (25%) or more of the combined voting power of
Company’s then outstanding securities, increases his beneficial ownership of such securities
through either



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successive or simultaneous acquisition by a total of three (3) percentage points or
more over the percentage so owned by such person prior to such acquisition; or




          (d) the Board adopts a resolution to the effect that, for purposes of this Agreement, a
Proposed Change in Control of Company has occurred.



          6.2. Continued Employment. If a Proposed Change in Control occurs prior to the
expiration of this Agreement, Executive agrees that he will remain in the employ of Company until
the earliest of (a) a date which is one hundred eighty (180) days from the occurrence of such
Proposed Change in control of Company, (b) the termination of Executive’s employment by reason of
death or Disability as defined in Section 5.2 of this Agreement, or (c) the date on which Executive
first becomes entitled under this Agreement to receive the benefits provided in Section 6.5 of this
Agreement.




          If a Proposed Change in Control occurs prior to the expiration of this Agreement, Company
agrees that it will not terminate Executive’s employment without Cause until the earliest of (a) a
date on which the Board adopts a resolution to the effect that the actions leading to such Proposed
Change in control have been abandoned or terminated, (b) the termination of Executive’s employment
by reason of Death or Disability as defined in Section 5.2 of this Agreement, or (c) the date on
which Executive first becomes entitled under this Agreement to receive the benefits provided in
Section 6.5 of this Agreement.




          6.3. Term of Agreement. If a Change in Control occurs prior to the expiration of this
Agreement, this Agreement shall continue in effect for a period of not less than twenty-four (24)
months beyond the month in which the Change in Control shall have occurred provided that (i) such
Change in Control shall have occurred prior to the end of the Employment Period and (ii) if
Executive’s employment has not been terminated pursuant to Section 5 of this Agreement prior to the
occurrence of such Change in Control.




          6.4. Termination Following Change in Control. If a Change in Control shall have
occurred, Executive shall be entitled to the benefits provided in Section 6.5. of this Agreement
upon the termination of his employment within twenty-four (24) months after such Change in Control
has occurred, unless such termination is (a) because of Executive’s death, (b) by the Company for
Cause, (c) because of Executive’s Disability or (d) by Executive other than for Good Reason (as all
such capitalized terms are hereinafter defined).




          (i) Disability. Termination by Company of Executive’s employment based on Disability
shall have the meaning as defined in Section 5.2 of this Agreement.




          (ii) Termination by Company for Cause. Company may terminate Executive’s employment
for Cause, through its Board of Directors, immediately upon Notice of Termination. Termination by
Company of Executive’s employment for Cause shall have the meaning as defined in Section 5.1 of
this Agreement.




          (iii) Termination by Executive for Good Reason. Executive may terminate his
employment for Good Reason upon ninety (90) day’s written Notice of Termination. Termination by
Executive of his employment for Good Reason shall have meanings:







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          (a) a change in Executive’s status, position(s) or responsibilities as an officer of
Company which, in his reasonable judgment, does not represent a promotion from his status,
title, position(s) and responsibilities as in effect immediately prior to the Change in
Control, or the assignment to him of any duties or responsibilities which, in his reasonable
judgment, are inconsistent with such status, title or position(s), or any removal of him
from or any failure to reappoint or reelect him to such position(s), except in connection
with the termination of his employment by Company for Cause, for Disability or as result of
Executive’s death or by Executive as defined in Section 5.3 of this Agreement:




          (b) a reduction by Company in Executive’s Base Salary as in effect immediately prior to
the Change in Control;




          (c) the failure by Company to continue in effect any Plan (as defined in Section 4.4.
of this Agreement) in which he is participating at the time of the Change in Control (or
Plans providing him with at least substantially similar benefits) other than as a result of
the normal expiration of any such Plan in accordance with its terms in effect at the time of
the Change in Control, or the taking of any action, or the failure to act, by Company which
would adversely affect his continued participation in any of such Plans on at least as
favorable a basis to him as is the case on the date of the Change in Control or which would
materially reduce his benefits in the future under any of such Plans or deprive him of any
material benefit enjoyed by him at the time of the Change in Control;




          (d) Company’s requiring Executive to be based anywhere other than where Executive’s
office is located immediately prior to the Change in Control except for required travel on
Company’s business to an extent substantially consistent with the business travel
obligations which Executive undertook on behalf of the Company prior to the Change in
Control;




          (e) the failure by Company to obtain from any Successor (as hereinafter defined) the
assent to this Agreement contemplated by Section 6.6 of this Agreement; and




          (f) any purported termination by Company of Executive’s employment is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 7.1. of this
Agreement which purported termination shall not be effective for purposes of this Agreement.



          (iv) Termination by Company Without Cause. Company may terminate Executive’s
employment, through its Board of Directors, without Cause upon ninety (90) days’ written Notice of
Termination. Termination by Company of Executive’s employment without Cause shall have the meaning
as defined in Section 5.1 of this Agreement.






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          (v) Termination by Executive Without Good Reason. Executive may terminate his
employment without Good Reason upon ninety (90) days’ written Notice of Termination.




          6.5. Compensation Upon Termination or During Disability.




          (i) Compensation Upon Disability. During any period following a Change in Control
that Executive fails to perform his duties as a result of Disability, Company shall make the
payments set forth in Section 5.5. (ii) of this Agreement.




          (ii) Compensation Upon Termination by Company for Cause. If Executive’s employment
shall be terminated by Company for Cause following a Change in Control, Company shall make the
payments set forth in Section 5.4 (i) of this Agreement.




          (iii) Compensation Upon Termination by Company Without Cause or by Executive for Good
Reason. If, Executive is terminated without cause as provided in § 5.1, or within twenty-four
(24) months after a Change in Control shall have occurred Executive’s employment by Company shall
be terminated (a) by Company without cause or (b) by Executive for Good Reason based on an event
occurring concurrent with or subsequent to a Change in Control, then, at the time specified in
Subsection (vii), Executive shall be entitled, without regard to any contrary provisions of any
Plan, to the benefits as provided below:





          (a) the Company shall pay Executive his full Base Salary through the Date of
Termination at the rate in effect just prior to the time a Notice of Termination is given
plus any benefits or awards (including both cash and stock components) which pursuant to the
terms of any Plans have been earned or become payable, but which have not yet been paid to
Executive (including amounts which previously had been deferred at Executive’s request);




          (b) as severance pay and in lieu of any further salary for periods subsequent to the
Date of Termination, Company shall pay to Executive at the time specified in subsection
(vii), a single lump sum severance payment (the “Severance Payment”) in an amount in cash
equal to three (3) times Executive’s annual Base Salary at the rate in effect just prior to
the time a Notice of Termination is given;




          (c) Company shall maintain in full force and effect, for the continued benefit of
Executive and Executive’s dependents for a period terminating on the earliest of (x) two (2)
years after the Date of Termination or (y) the commencement date of equivalent benefits from
a new employer all life, accidental death, medical and dental insurance plans or programs in
which Executive was entitled to participate immediately prior to the Date of Termination,
provided that Executive’s continued participation is possible under the general terms and
provisions of such plans and Executive continues to pay an amount equal to his regular
contribution for such participation, if any. In the event that Executive’s participation in
any such plan is barred, Company at its sole cost and expense, shall arrange to have issued
for the benefit of Executive and Executive’s dependents individual policies of insurance
providing benefits substantially similar (on an after-tax basis) provided that, Company
shall be responsible for the payment of such benefits (on an after tax basis)



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to those which Executive otherwise would have been entitled to receive under such plans
pursuant to this paragraph (c) or, if such insurance is not available at a reasonable cost
to Company, Company shall otherwise provide Executive and Executive’s dependents equivalent
benefits (on an after tax basis) for a period not to exceed five (5) years following the end
of the two (2) years after the Termination Date. Executive shall not be required to pay any
premiums or other charges in an amount greater than that which Executive would have paid in
order to participate in such plans.




      Company shall pay Executive for any vacation time earned but not taken at the Date of
Termination, at an hourly rate equal to Executive’s annual Base Salary as in effect
immediately prior to the time a Notice of Termination is given divided by 2080.




      Company shall pay to Executive all legal fees and expenses incurred by Executive as a
result of such termination, including all such fees and expenses, if any, incurred in
contesting or disputing any such termination in seeking to obtain or enforce any right or
benefit provided by this Section 6 of this Agreement (other than any such fees or expenses
incurred in connection with any such claim which is determined to be frivolous) or in
connection with any tax audit or proceeding to the extent attributable to the application of
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”).



          (iv) Compensation Upon Termination by Executive Without Good Reason. If Executive’s
employment shall be terminated by Executive without Good Reason following a Change in Control,
Company shall make the payments set forth in Section 5.6 of this Agreement.




          (v) No Offsets or Reductions. Except as specifically provided above, the amount of any
payment provided for in this Section 6.5. shall not be reduced offset or subject to recovery by
Company by reason of any compensation earned by Executive as the result of employment by another
employer after the Date of Termination, or otherwise. Executive’s entitlements under Section 6.5.
of this Agreement are in addition to, and not in lieu of, any rights, benefits or entitlements
Executive may have under the terms or provisions of any Plan.




          (vi) Company’s Deduction of Payment. Notwithstanding anything in the foregoing to the
contrary, Company shall not be obligated to pay any portion of any amount otherwise payable to
Executive pursuant to this Agreement if the payment would cause any amount to be paid by Company to
Executive to not be reasonably deductible by the Company solely by operation of Section 280G of the
Internal Revenue Code of 1986, as amended, or any equivalent successor provision of law.




          (vii) Time of Payment. The payments provided for in Subsection (iii) shall be made not
later than the fifth day following the Date of Termination; provided, however, that if the amounts
of such payments cannot be finally determined on or before such day, Company shall pay to Executive
on such day an estimate, as determined in good faith by Company, of the minimum amount of such
payments and shall pay the remainder of such payments (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no
event later than the thirtieth day after the Date of Termination. In the event that the amount of
the estimated payments






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exceeds the amount subsequently determined to have been due, such excess shall constitute a
loan by Company to Executive payable on the fifth (5th) day after demand therefore by
Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).




          (viii) Section 409A.




               In the event that any payments to the Executive required to be made pursuant to any provisions
of this Agreement are determined, in whole or in part, to constitute “Non-qualified Deferred
Compensation” (“NQDC”) within the meaning of Section 409A of the Code, then the portion, which may
be all of such payments that constitute NQDC will not be paid before the date which is six (6)
months after Executive’s “separation from service” as such term is defined in Section 409A of the
Code). The determination of whether and what amount of any payments to the Executive required to
be made pursuant to any provision of this Agreement constitute NQDC shall be made by the Board of
Directors of the Company and in consultation with legal counsel, and any such determination shall
be final and binding on the Company and the Executive. The Company makes no representation as to
whether any such payment or any part thereof constitutes or may constitute NQDC. Neither the
Company nor any of its directors, officers, employees, agents, or professional advisors shall have
any liability to the Executive or any other person or any amounts incurred by Executive or any such
other persons by reason of the determination made by the Board of Directors pursuant to this
paragraph or any action taken or omitted by the Board, the Company, or any of the Company’s
directors, officers, employees, agents, or professional advisors in the course of, or as a result
of, making such determination.




          6.6. Successors; Binding Agreement.




          (i) Successors. 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 Company to expressly assume and agree to perform Company’s obligations under this
Agreement in the same manner and to the same extent that Company would be required to perform it if
not such succession had taken place. Failure of Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this Agreement and shall
entitle Executive to compensation from Company in the same amount and on the same terms to which
Executive would be entitled hereunder if Executive terminated his employment for Good Reason
following a Change in Control of Company, 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 in this Agreement, “Company” shall mean the Company as hereinbefore defined and any Successor
to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.




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







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          6.7. Arbitration. Any dispute or controversy arising under or in connection with
Section 6 of this Agreement shall be settled exclusively by arbitration in California by three
arbitrators in accordance with the rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrators’ award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of Executive’s right to be
paid until the Date of Termination during the pendency of any dispute or controversy arising under
or in connection with the Agreement. Company shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section 6.7.




          6.8. Survival. The respective obligations of, and benefits afforded to, Company and
Executive as provided in Section 6.5, 6.6 and 6.7 of this Agreement shall survive termination of
this Agreement.




          6.9. Termination of Company’s Obligation. If at any time within the twenty-four (24)
month period following termination of Executive’s employment without Cause by Company pursuant to
Section 6.4 (iv) or termination by Executive for Good Reason pursuant to Section 6.4 (iii) of this
Agreement, Executive breaches any of his obligations under Sections 8, 9, 10, 11, and/or 12 of this
Agreement, then Company’s obligation to make payments under Section 6.5 (iii) shall cease as of the
date such breach occurs.




     7. Definitions. For purposes of Section 5 and Section 6 of this Agreement, Notice of
Termination and Date of Termination shall have the following meanings:




          7.1. Notice of Termination. Any purported termination by Company or by Executive
pursuant to Section 5 or Section 6 of this Agreement shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 18.3 of this Agreement. For
purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and, except in the event of
termination by Executive without Good Reason or termination by Company without Cause, such Notice
of Termination shall set forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of Executive’s employment under the provisions so indicated.




          7.2. Date of Termination. “Date of Termination” following a termination of Executive’s
employment by Company or Executive pursuant to Section 5 or Section 6 of this Agreement shall mean
(i) if Executive’s employment is to be terminated for Disability, thirty (30) days after Notice of
Termination is delivered by the Board to Executive provided that such notice shall be given only
after the expiration of any one hundred twenty (120) consecutive days during all of which Executive
shall be unable by reason of his disability to perform his principal duties (provided that such
Notice of Termination shall be null and void if Executive fully resumes the performance of
Executive’s duties under this Agreement prior to the Date of Termination as set forth in the
Notice); (ii) if Executive’s employment is to be terminated by company for cause, the date on which
a Notice of Termination is given; and (iii) if Executive’s employment is terminated by Executive
with Good Reason or without Good Reason or by Company without Cause, the date specified in the
Notice of Termination, which shall be a date no earlier than thirty (30) days after the date on
which Notice of Termination pursuant to Section 5 is given and no earlier than ninety (90) days
after the date on which a Notice of Termination pursuant to Section 6 is given, unless an earlier
date has been agreed to by the party receiving the Notice of Termination either in advance of, or
after, receiving






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such Notice of Termination. Notwithstanding anything in the foregoing to the contrary, if the
party receiving the Notice of Termination pursuant to Section 6 has not previously agreed to the
termination, then within thirty (30) days after any Notice of Termination is given, the party
receiving such Notice of Termination may notify the other party that a dispute exists concerning
the termination, in which event the Date of Termination shall be the date set either by mutual
written agreement of the parties or by the arbitrators in a proceeding as provided in Section 6.7
of this Agreement.




     8. Confidentiality.



          8.1. Definition of Confidential Information. As used in this Agreement, the term
“Confidential Information” means: (a) proprietary information of Company; (b) information marked or
designated by Company as confidential; (c) information, whether or not in written form and whether
or not designated as confidential, which is known to Executive as being treated by Company as
confidential; and (d) information provided to Company by third parties which Company is obligated
to keep confidential. Confidential Information includes but is not limited to, discoveries, ideas,
designs, drawings, specifications, techniques, models, devises, data, formula, programs,
documentation, processes, know-how, customer lists, marketing plans, and financial and technical
information.




          8.2. Acknowledgment of Receipt of Confidential Information. Executive acknowledges
that in the course of performing his duties for Company he will have access to Confidential
Information, the ownership and confidential status of which are highly important to company, and
Executive agrees in addition to the specific covenants contained herein to comply with all Company
policies and procedures for the protection of such Confidential Information.




          8.3. Ownership. Executive acknowledges that all Confidential Information is and shall
continue to be the exclusive property of Company, whether or not prepared in whole or in part by
him and whether or not disclosed to or entrusted to him in connection with employment by Company.




          8.4. Acknowledgment of Irreparable Harm. Executive acknowledges that any disclosure of
Confidential Information will cause irreparable harm to Company.




          8.5. Covenant of Nondisclosure. Executive agrees not to disclose Confidential
Information, directly or indirectly, under any circumstances or by any means, to any third person
without the express written consent of Company.




          8.6. Covenant of Nonuse. Executive agrees that he will not copy, transmit, reproduce,
summarize, quote, or make any commercial or other use whatsoever of Confidential Information,
except as may be necessary to perform work done by him for Company.




          8.7. Safeguard of Confidential Information. Executive agrees to exercise the highest
degree of care in safeguarding Confidential Information against loss, theft, or other inadvertent
disclosure and agree generally to take all steps necessary or requested by Company to insure
maintenance of confidentiality.







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          8.8. Exclusions. This Agreement shall not apply to the following information: (a)
information now and hereafter voluntarily disseminated by Company to the public or which otherwise
becomes part of the public domain through lawful means; (b) information already known to Executive
as documented by written records which predate this Agreement; (c) information subsequently and
rightfully received from third parties and not subject to any obligation of confidentiality; (d)
information independently developed by Executive.




          8.9. Work Made for Hire. Executive agrees that all creative work, including computer
programs or models, prepared or originated by him for Company or during or within the scope of his
employment by Company which may be subject to protection under Federal copyright Law, constitutes
“work made for hire,” all rights to which are owned by Company; and, in any event, Executive
assigns to Company all intellectual property rights in such work whether by right of copyright,
trade secret or otherwise and whether or not subject to protection by copyright laws.




     9. Company Ownership of Trade Secrets.



          9.1. Company Ownership. Executive agrees that all inventions, discoveries,
improvements, trade secrets, formula, techniques, processes, know-how and computer programs,
whether or not patentable, and whether or not reduced to practice, conceived or developed during
his employment by Company, either alone or jointly with others, which relate to or result from the
actual or anticipated business, work, research, or investigation of Company or any affiliated
company, or which result to any extent from use of Company or any affiliated company’s premises or
property, shall be owned exclusively by the Company, Executive hereby assigns to Company all his
right, title and interest in all such inventions, trade secrets, etc., and Executive agrees that
Company shall be the sole owner of all domestic and foreign patents or other rights pertaining
thereto, and further agree to execute all documents which Company reasonably determines to be
necessary or convenient for use in applying for, perfecting, or enforcing patents or other
intellectual any assignments, patent applications, or other documents which may be requested by
Company. Notwithstanding the above, this provision does not apply to an invention for which no
equipment, supplies, facilities, or trade secret of Company was used and which was developed
entirely on Executive’s own time, unless (a) the invention relates (i) directly to the business of
Company, or (ii) to Company’s actual or demonstrably anticipated research or development, or (b)
the invention results from any work performed by Executive for Company.




          9.2. Executive Inventions. All inventions, if any, of Executive made prior to
Executive’s employment by Company are excluded from the scope of this Agreement and a complete list
of such inventions, if any, is attached to this Agreement as Exhibit A. Executive agrees to
disclose to Company at the time of employment or thereafter, all inventions being developed by
Executive for the purposes of determining Executive or Company rights to the invention.




     10. Ventures. If Executive, during the term of this Agreement, is engaged in or
associated with the planning or implementing of any project, program or venture involving Company
and any third party or parties, all rights in the project, program or venture shall belong to
Company, and Executive shall not be entitled to any interest therein or to any commission,



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finder’s fee or other compensation in connection therewith other than the salary to be paid to
Executive as provided in this Agreement.




     11. Covenant of Good Faith. Executive agrees that the subject of this Agreement
involves sensitive matters which go to the very heart of the corporate existence and well-being of
Company and that it may be difficult for Company to protect adequately its interest through
agreement or otherwise. Executive agrees to exercise the highest degree of good faith in his
dealings with Company and to refrain from any actions which might reasonably be deemed to be
contrary to its interests.



     12. Delivery of Materials. Upon termination of his employment status, Executive will
deliver to Company all materials, including without limitation documents, records, drawings,
prototypes, models and schematic diagrams, which describe, depict, contain, constitute, reflect,
record or in any way relate to inventions or Confidential Information, which are in Executive’s
possession or under his control, whether or not the materials were prepared by Executive.



     13. Subpoenas. If Executive is served with any subpoena or other compulsory judicial
or administrative process calling for production of Confidential Information or if Executive is
otherwise required by law or regulation to disclose Confidential Information, Executive will
immediately, and prior to production or disclosure, notify Company and provide it with such
information as may be necessary in order that Company may take such action as it deems necessary to
protect its interest.



     14. Remedies. Executive acknowledges that breach of Sections 8, 9, 10, 11, 12, 13, 15
and 16 of this Agreement will cause irreparable harm to the Company and if Executive fails to abide
by these obligations, Company will be entitled to specific performance, including immediate
issuance of a temporary restraining order of preliminary injunction enforcing this Agreement, and
to judgment for damages caused by Executive’s breach, and to the rights and duties of Company and
Executive, respectively, under this Agreement are in addition to, and not in lieu of, those rights
and duties afforded to and imposed upon them by law or at equity.



     15. Termination Certificate. Upon termination of this Agreement, Executive will give
a written statement to Company certifying that he has complied with his obligations under Sections
9, 11 and 12 and acknowledging his continuing obligations under Section 8 to preserve and
confidentiality of Company’s confidential or secret knowledge or information, and under Section 13
to notify Company if he is served with a subpoena.



     16. Other Obligations. Executive acknowledges that Company from time-to-time may have
agreements with other persons or with various governmental agencies that impose obligations or
restrictions on Company regarding inventions or creative works made during the course of work
thereunder or regarding the confidential nature or such work. Executive agrees to be bound by all
such obligations and restrictions of which he is informed by Company and to take all action
necessary to discharge the obligations of Company thereunder.



     17. Durations. The obligations set forth in Sections 8, 9, 10, 11, 12 and 13 of this
Agreement will continue beyond the term of Executive’s employment by Company for two years
following such termination.



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     18. General Provisions.



          18.1. Severability. The provisions of this Agreement are severable and if any
provision hereof is held to be invalid, illegal, or unenforceable in any respect, it shall be
enforced to the maximum extent permissible, and the remaining provision of the agreement shall not
be affected thereby and in full force and effect.




          18.2. Attorney’s Fees/Applicable Law/Venue. Except as provided in Section 6.5(iii),
in any action or suit arising out of this Agreement, the prevailing party shall be entitled to
recover all reasonable attorneys’ fees and expenses of litigation, including fees on appeal or in
connection with any petition for review. The rights and obligations of the parties under this
Agreement shall in all respects be governed by the laws of the State of California exclusive of
choice of law rules.




          18.3. Notice. Any notice provided for hereunder may be delivered to the designated
recipient either by personal delivery or by certified mail, return receipt requested. If mailed,
the notice when enclosed in an envelope properly addressed to the proposed recipient at his address
last of record with the notifying party and deposited postage paid in a mail depository of the
United States post office, shall be deemed given when so mailed. Notice to Company shall be so
delivered or addressed to an officer of Company other than Executive.




          18.4. Assignment. Executive acknowledges that the services to be rendered are unique
and personal. This Agreement may not be assigned by Executive.




          18.5. Successors of Company. This Agreement shall inure to the benefit of and shall
be binding upon Company, its successors, or assigns.




          18.6. Waiver. Company may waive any obligation Executive has under this Agreement,
but such waiver will not affect Company’s right to require strict compliance with the Agreement in
the future.




          18.7. Entire Agreement. This Agreement supersedes all previous agreements, oral or
written, between Company and Executive and constitutes the entire agreement between the Parties,
and unless otherwise provided in this Agreement, no modification or waiver of any of the provisions
or any future representation, promise, or addition shall be binding upon the Parties unless made in
writing and signed by both Parties.







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     In witness whereof, the parties have executed this contract on the date first set forth above.



	 	 	 	 	 
	 	LEGACY ENERGY, INC.

 	 
	 	By:  	/s/ E. Sven Hagen
 	 
	 	 	E. Sven Hagen, CEO 	 
	 	 	 	 
	 	EXECUTIVE



CLARENCE COTTMAN, III

 	 
	 	/s/ Clarence Cottman, III
 	 
	 	(Signature) 	 
	 	 	 
	 




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