Document:

star_ex43.htm

Exhibit 4.3

 

AGREEMENT

 

This AGREEMENT (this “Agreement”) is made effective as of _______________ 2012 by and among STARBOARD RESOURCES, INC., a Delaware corporation (the “Company”), and LONGVIEW MARQUIS MASTER FUND, L.P., a British Virgin Islands limited partnership (“LMMF”), SUMMERVIEW MARQUIS FUND, L.P., a Delaware limited partnership (“SMF”), LONGVIEW MARQUIS FUND, L.P., a Delaware limited partnership (“Longview”), LMIF INVESTMENTS, LLC, a Delaware limited liability company (“LMIFI”), SMF INVESTMENTS, LLC, a Delaware limited liability company (“SMFI”), and SUMMERLINE CAPITAL PARTNERS, LLC, a Delaware limited liability company (“Summerline” and, together with LMMF, SMF, Longview, LMIFI and SMFI, each a “Summerline Party” and, collectively, the “Summerline Parties”).

 

RECITALS:

 

WHEREAS, reference is made to that certain Securities Purchase and Exchange Agreement (the “Securities Purchase and Exchange Agreement”) dated as of June 10, 2011 by and among the Company, the Summerline Parties, and the other stockholders of the Company party thereto;

 

WHEREAS, the stockholders of the Company other than the Summerline Parties own, collectively, 87.3874% of the issued and outstanding common stock shares of the Company;

 

WHEREAS, certain of the Summerline Parties are stockholders of the Company and own, collectively, 12.6126% of the issued and outstanding common stock shares of the Company;

 

WHEREAS, pursuant to and in accordance with Section 2(c) the Securities Purchase and Exchange Agreement, each of the Summerline Parties has the right to require the Company to purchase the common stock shares of the Company held by such Summerline Party, for an amount equal to such Summerline Party’s Put/Call Payment Amount (as defined in the Securities Purchase and Exchange Agreement), if the Company failed to use commercially reasonable efforts to consummate the Merger (as defined in the Securities Purchase and Exchange Agreement) by December 10, 2011 (such Summerline Party’s “Put Option” and, collectively, the “Summerline Parties Put Options”);

 

WHEREAS, the sum of all Put/Call Payment Amounts for the Summerline Parties, collectively, is $18,400,000;

 

WHEREAS, the Board of Directors of the Company (the “Board of Directors”) has approved a transaction, pursuant to which the Company shall file with the Securities and Exchange Commission (“SEC”) a registration statement under the Securities Act of 1933, as amended (the “1933 Act”), or under the Securities Exchange Act of 1934, as amended (the “1934 Act”), registering the Company’s common stock shares and list the Company’s common stock shares on a national securities exchange (the effective registration of the Company’s common stock under the 1933 Act and/or the 1934 Act and the listing of the Company’s equity securities on a national securities exchange are collectively referred to herein as the “IPO”); and

 

  

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WHEREAS, each Summerline Party has agreed, subject to the terms and conditions set forth herein and in connection with the consummation of the IPO, to waive such Summerline Party’s Put Option in exchange for (1) the Company’s issuing to each Summerline Party the number of shares of common stock of the Company set forth next to such Summerline Party’s name on Schedule A attached hereto, representing the issuance to the Summerline Parties collectively of an aggregate of 707,336 shares of common stock of the Company (the “New Summerline Equity”), which issuance shall increase the Summerline Parties’ collective common stock shares in the Company by five percentage (5%) points on a fully-diluted basis (i.e., such issuance to the Summerline Parties shall increase the Summerline Parties’ collective ownership percentage of the issued and outstanding common stock shares of the Company, on a fully-diluted basis, to 17.6127%) (provided that, solely for purposes of this Agreement, such calculation shall exclude any and all shares of Company common stock issued or issuable as compensation (such shares of Company common stock are referred to herein collectively as the “Employment Compensation Shares”) to any of Michael J. Pawelek, Edward B. Shaw or Kim Vo as employees of the Company pursuant to the terms of the respective employment agreements, as in full force and effect as of the date hereof, between the Company and such Company employee, in each case dated as of April 1, 2012, true, correct and complete copies of which have been provided to the Summerline Parties prior to the date hereof (the “Employment Agreements”), and (2) the Company’s granting to the Summerline Parties of certain approval rights with respect to specified actions of the Company set forth herein.

 

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound, the parties hereto hereby agree as follows:

 

1. Waiver of the Put Option.  Subject to, and effective upon, the receipt by each of the Summerline Parties on the date hereof of the portion of (a) the New Summerline Equity and (b) the Current Going Public Delay Fee Amount (as defined in Section 5 below), in each case set forth next to such Summerline Party’s name on Schedule A attached hereto, and in each case as provided herein, (i) each of the Summerline Parties hereby waives such Summerline Party’s Put Option and (ii) each of the Company and the Summerline Parties hereby agrees that the Summerline Parties Put Options shall be of no further force or effect.  In the event that any Summerline Party does not receive the portion of the New Summerline Equity or Current Going Public Delay Fee Amount set forth next to such Summerline Party’s name on Schedule A attached hereto on the date hereof as provided herein, the provisions of this Section 1 shall be null and void and of no force or effect.

 

2. Transfer of the New Summerline Equity.  The Company hereby agrees to issue and deliver, and is issuing and delivering, concurrent with the Summerline Parties’ execution of this Agreement and in the manner provided herein, to each of the Summerline Parties the New Summerline Equity set forth next to such Summerline Party’s name on Schedule A attached hereto, representing the issuance to the Summerline Parties collectively of an additional aggregate 707,336 shares of common stock of the Company.  The Company’s issuance to each of the Summerline Parties of the New Summerline Equity set forth next to such Summerline Party’s name on Schedule A attached hereto shall be effected by the Company’s delivery on the date hereof to each Summerline Party of a stock certificate representing the number of shares of common stock of the Company set forth next to such Summerline Party’s name on Schedule A attached hereto, duly executed on behalf of the Company and, as applicable, countersigned by the Company’s transfer agent for its common stock and registered in the name of such Summerline Party.

 

  

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3. Representations, Warranties and Covenants of the Company.  The Company hereby represents, warrants and covenants to each of the Summerline Parties that:

 

a. (I) as of the date hereof, but prior to giving effect to the issuance of the New Summerline Equity to the Summerline Parties, the issued and outstanding equity of the Company consists of 11,655,000 common stock shares, (II) no other shares of capital stock, units or other similar equity interests of the Company are issued and outstanding, or, except for the Employment Compensation Shares, reserved for issuance under any plan or agreement, and (III) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable for, any shares of capital stock of the Company, or, other than the Employment Agreements, contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company;

 

b. the New Summerline Equity is duly authorized and, upon issuance in accordance with the terms hereof, will be validly issued, fully paid and non-assessable and free from taxes and liens with respect to the issuance thereof, with the holders thereof being entitled to all rights of a holder of common stock shares of the Company;

 

c. the offer, issuance and sale by the Company of the New Summerline Equity are exempt from registration under the 1933 Act and any other applicable securities laws and the New Summerline Equity will be issued in compliance with applicable securities laws;

 

d. neither the Company nor any person that directly, or indirectly through one or more Affiliates (as defined in the Securities Purchase and Exchange Agreement) of the Company, nor any person or entity acting on the behalf of any of the foregoing, has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act), including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or the internet or broadcast over radio, television or the internet or any seminar meeting whose attendees have been invited by general solicitation or general advertising, in connection with the offer or sale of the New Summerline Equity;

 

e. neither the Company nor any Affiliates of the Company or any person or entity acting on behalf of any of the foregoing, has, directly or indirectly, made, or will, directly or indirectly make, any offers or sales of any security or solicited, or will solicit, any offers to purchase any security, under circumstances that would require registration of any of the New Summerline Equity under the 1933 Act;

 

  

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f. no holders of any common stock shares of the Company have any obligation pursuant to the terms of the certificate of incorporation or the by-laws of the Company, the Delaware General Corporation Law, or otherwise, to make any payments to the Company or any other person or entity for their purchase of common stock shares of the Company or any contributions to the Company or any other person or entity by reason of their ownership of common stock shares of the Company;

 

g. immediately following the issuance of the New Summerline Equity, the Summerline Parties will own collectively 17.6127% of the equity interests of the Company, on a fully diluted basis (provided that, solely for purposes of this Agreement, such calculation shall exclude the Employment Compensation Shares);

 

h. the Company is a corporation that is duly incorporated and validly existing in good standing under the laws of Delaware and has the requisite corporate power and authority to own its properties, to carry on its business as now being conducted and as proposed to be conducted by the Company and to enter into and perform its obligations under this Agreement;

 

i. the execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, including, without limitation the issuance of the New Summerline Equity to the Summerline Parties, have been duly authorized by the Board of Directors, and no further consent or authorization is required by the Company, the Board of Directors or the holders of common stock shares of the Company;

 

j. this Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, and (i) the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder, and the consummation by the Company of the transactions contemplated hereby, will not (I) result in a violation of the certificate of incorporation or the bylaws of the Company, (II) conflict with, or constitute a breach or default (or an event which, with the giving of notice or lapse of time or both, constitutes or would constitute a breach or default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or other remedy with respect to, any agreement, indenture or instrument to which the Company is a party, or (III) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected;

 

k. during the period commencing with the date of this Agreement and ending on the date that is one year after the consummation of the IPO, the Company shall not register for resale with the SEC any shares of common stock of the Company unless the Company permits each of the Summerline Parties or their respective transferees to include in such registration the shares of Company common stock then beneficially owned by such Summerline Party or transferee; and

 

  

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l. the New Summerline Equity shall not be subject to any restrictions on transferability and the certificates representing the New Summerline Equity shall not bear any restrictive legend, except that the New Summerline Equity shall be subject to restrictions under the securities laws and the certificates representing the New Summerline Equity may bear the following legend (the “1933 Act Legend”):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

Upon the written request to the Company of a holder of a certificate representing any New Summerline Equity, the 1933 Act Legend shall be removed and the Company shall issue a certificate without the 1933 Act Legend to the holder of the New Summerline Equity upon which it is stamped, if (A) such shares are registered for resale under the 1933 Act, (B) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the New Summerline Equity may be made without registration under the 1933 Act, (C) such holder provides the Company with reasonable assurances that the New Summerline Equity can be sold pursuant to Rule 144 promulgated under the 1933 Act, as amended (or a successor rule thereto) (“Rule 144”) without compliance with Rule 144(e) or Rule 144(f) (or successors thereto), (D) such holder provides the Company reasonable assurances that the New Summerline Equity has been or is being sold pursuant to Rule 144, or (E) such holder certifies, on or after the date that is one year after the date on which such holder acquired the New Summerline Equity (or is deemed to have acquired the New Summerline Equity under Rule 144), that such holder is not an “affiliate” of the Company (as defined in Rule 144).  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holders of the New Summerline Equity.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this section will be inadequate and agrees that, in the event of a breach or threatened breach of this section, such holder shall be entitled, in addition to all other available remedies, to an injunctive order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.

 

  

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4. Representations and Warranties of Summerline Parties.

 

a. Each of the Summerline Parties, individually and not jointly and severally, represents and warrants to the Company that such Summerline Party has the requisite partnership or limited liability company power and authority, as applicable, to enter into and perform its obligations under this Agreement in accordance with its terms.

 

b. Each of the Summerline Parties that holds shares of Company common stock as of the date of this Agreement, individually and not jointly and severally, represents and warrants to the Company that:

 

i.           Such Summerline Party has had an opportunity to make an investigation of the Company and its business as it deemed necessary, and has had an opportunity to discuss and review the Company’s business, management and financial affairs with the Company’s management as it deemed necessary, in each case in connection with the issuance by the Company of the New Summerline Equity pursuant to the terms hereof; provided that neither such inquiries nor any other due diligence investigations conducted by such Summerline Party or any of its advisors, if any, or its representatives, if any, shall modify, amend or affect such Summerline Party’s right to rely on the representations and warranties of the Company contained in Section 3 hereof or the representations and warranties of the Company contained in the Securities Purchase and Exchange Agreement;

 

ii.           The common stock shares being issued to such Summerline Party pursuant to this Agreement are being acquired for its own account for the purpose of investment and not with a view to, or for sale in connection with, any distribution thereof, except pursuant to sales registered under, or exempted from the registration requirements of, the 1933 Act; provided, however, that by making the representations herein, such Summerline Party does not agree to hold any of the New Summerline Equity for any minimum or other specific term, and reserves the right to dispose of any of the Summerline Equity at any time in accordance with or pursuant to an effective registration statement or an exemption under the 1933 Act; and

 

iii.           Such Summerline Party understands that the common stock shares being issued to such Summerline Party pursuant to this Agreement (A) have not been registered under the 1933 Act by reason of their issuance in a transaction exempt from the registration requirements of the 1933 Act and the regulations promulgated thereunder, and (B) may not be offered for sale, sold, assigned or transferred unless such shares have been subsequently registered under the 1933 Act or will be sold, assigned or transferred pursuant to an exemption from such registration.

 

  

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5. Going Public Delay Fee.  The Company hereby agrees to pay, and is paying, concurrent with the Summerline Parties’ execution of this Agreement, to each Summerline Party such Summerline Party’s portion of the Going Public Delay Fee (as defined in the Securities Purchase and Exchange Agreement) which is due and payable thereto as of May 31, 2012, calculated in accordance with Section 8(d) of the Securities Purchase and Exchange Agreement, and which aggregate amount due and payable to the Summerline Parties collectively is equal to $166,668.49 (the “Current Going Public Delay Fee Amount”).  Each Summerline Party’s portion of the Current Going Public Delay Fee Amount is set forth next to such Summerline Party’s name on Schedule A attached hereto.  The Company’s payment to each of the Summerline Parties of the portion of the Going Public Delay Fee Amount set forth next to such Summerline Party’s name on Schedule A attached hereto shall be effected by the Company’s payment on the date hereof of such portion of the Going Public Delay Fee Amount by wire transfer of immediately available funds pursuant to instructions provided by such Summerline Party.

 

6. Veto Rights.  Notwithstanding anything (and, for purposes of clarification, not in limitation of the rights of any Summerline Party) set forth in the Securities Purchase and Exchange Agreement, the prior written approval of each of Longview, LMIFI and SMFI, or their respective successors and assigns, shall be required for the Company or the Board of Directors, as applicable, at any time prior to the consummation of the IPO, to:

 

a. consummate a sale of the equity securities of the Company to the extent that the valuation of all equity securities of the Company at the time of such sale is more than thirty percent (30%) below the then present value of the Company’s estimated proved future oil and gas net revenues calculated at an annual discount rate of ten percent (10%);

 

b. issue, or authorize the issuance of, any class of equity security that is not identical to the class of equity securities held by the Summerline Parties;

 

c. issue any equity securities (other than the issuance of the Employment Compensation Shares and any other shares of Company common stock issued or issuable as compensation to any officer or other employee of the Company for services provided or to be provided to the Company in such capacity) unless each of the Summerline Parties is provided at least 20 days prior written notice of such proposed issuance and given the preemptive right to purchase an amount of such Company equity securities (on the same terms and conditions as the proposed issuance, which terms and conditions shall be set forth in the Company’s written notice) as will enable such Summerline Party to maintain, post-issuance, such Summerline Party’s percentage equity ownership of the Company owned pre-issuance;

 

  

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d. amend, modify or waive any provision of the Company’s certificate of incorporation or bylaws; or

 

e. sell all or substantially all of the assets of the Company or its subsidiaries.

 

7. Avoidance of Doubt.  For the avoidance of doubt, each of the Company and the Summerline Parties hereby acknowledges and agrees that the Securities Purchase and Exchange Agreement, including, without limitation, the provisions set forth in Section 8(d) of the Securities Purchase and Exchange Agreement and the Company’s obligations with respect to the Going Public Delay Fee set forth therein, shall remain in full force and effect.

 

8. Publicity.  The Summerline Parties and the Company acknowledge that the Company and their affiliates may be subject to disclosure obligations involving the SEC in connection with filings made with the SEC and with auditors, underwriters, selling group members and investors in connection with the IPO.  In connection with the IPO, the Company or their affiliates may be required to file reports with the SEC describing this Agreement which may become public records. Further, the Company, as needed, may make filings with the SEC, the Texas State Securities Board and other state securities administrators in order to comply with relevant laws.  Finally, the Company, as needed, may need to discuss the terms of this Agreement with its auditor, with its underwriters and members of its selling group, and with prospective investors via road show or otherwise.

 

9. No Brokers.

 

a. The Company hereby represents and warrants that neither the Company nor any of its officers, members, managers, Affiliates (as defined in the Securities Purchase and Exchange Agreement) or representatives has (i) engaged any person or entity to act directly or indirectly as a broker, finder or financial advisor in connection with the transactions contemplated by this Agreement, or (ii) incurred any obligation or commitment to any person or entity for any fee or commission or like payment in respect of the transactions contemplated by this Agreement based in any way on any agreement, arrangement or understanding made by or on behalf of the Company.

 

b. Each Summerline Party, individually and not jointly and severally, hereby represents and warrants that neither such Summerline Party nor any of its officers, members, managers, partners or Affiliates (as defined in the Securities Purchase and Exchange Agreement) has (i) engaged any person or entity to act directly or indirectly as a broker, finder or financial advisor in connection with the transactions contemplated by this Agreement, or (ii) incurred any obligation or commitment to any person or entity for any fee or commission or like payment in respect of the transactions contemplated by this Agreement based in any way on any agreement, arrangement or understanding made by or on behalf of such Summerline Party.

 

10. Further Assurances.  Each party hereto shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other parties hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement.

 

  

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11. Expenses.  The Company hereby covenants and agrees to reimburse the Summerline Parties for their out-of-pocket legal fees, costs and expenses up to a maximum of $15,000 incurred in connection with the drafting, negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby.  The Company shall reimburse the Summerline Parties for such fees, costs and expenses promptly upon receipt of written evidence thereof.

 

12. Governing Law.  This Agreement shall be construed in accordance with and governed by the laws of the State of New York applicable to agreements executed in and to be performed in New York, without regard to the principles thereof regarding conflicts of law.  The parties to this Agreement irrevocably submit to the sole and exclusive in personam jurisdiction of any federal or state court sitting in the New York City, Borough of Manhattan and waive any objections to the venue of a proceeding in any such court.

 

13. Integration; Amendment.  This Agreement constitutes the sole agreement of the parties with respect to the subject matter expressly set forth herein and supersedes all oral negotiations and prior writings with respect to the subject matter expressly set forth herein.  This Agreement may not be modified or amended except in a writing executed by all of the parties hereto.

 

14. Successors and Assigns.  The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Summerline Parties.  This Agreement shall be binding upon each of the parties hereto and, where applicable, each of their respective heirs, executors, administrators, successors and assigns, and shall inure to the benefit of such parties and their respective heirs, executors, administrators, successors and assigns.

 

15. Severability and Consistency.  The illegality, unenforceability or inconsistency of any provisions of this Agreement shall not in any way affect or impair the legality, enforceability or consistency of the remaining provisions of this Agreement or any instrument or agreement executed in connection herewith.

 

16. Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall be deemed one instrument, notwithstanding that no single counterpart shall have been signed by all parties.  This Agreement may also be executed by telecopy, facsimile transmission, e-mail delivery of a “.pdf” format data file or by other form of electronic transmission.

 

[Remainder of page intentionally left blank.  Signature page follows.]

 

  

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

 

	 	COMPANY: 

STARBOARD RESOURCES, INC.

By: ____________________________________

Name: Michael Pawelek

Title: Chief Executive Officer

SUMMERLINE PARTIES:

LONGVIEW MARQUIS MASTER FUND, L.P.

By: Summerline Asset Management, LLC, its Investment Advisor

By: ____________________________________

Name:  David Kittay

Its:  Co-Managing Member

SUMMERVIEW MARQUIS FUND, L.P.

By: Summerline Asset Management, LLC, its Investment Advisor

By: ____________________________________

Name: David Kittay

Its:  Co-Managing Member

LONGVIEW MARQUIS FUND, L.P.

By: Summerline Asset Management, LLC, its Investment Advisor

 

By: ____________________________________

Name:  David Kittay

Its:  Co-Managing Member

 

  

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LMIF INVESTMENTS, LLC

By: Longview Marquis International Fund, Ltd., its sole member

By: Summerline Asset Management, LLC, its Investment Advisor

 

By: ____________________________________

Name:  David Kittay

Its:  Co-Managing Member

 

SMF INVESTMENTS, LLC

By: Summerview Marquis Fund, L.P., its sole member

By: Summerline Asset Management, LLC, its Investment Advisor

By: ____________________________________

Name:  David Kittay

Its:  Co-Managing Member

 

SUMMERLINE CAPITAL PARTNERS, LLC

 

By: ____________________________________

Name:  David Kittay

Its:  Co-Managing Member

 

  

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Schedule A

 

	
Summerline Parties

	
New Summerline Equity (Additional Common Stock Shares)

	
Current Going Public Delay Fee Amount

	
Longview Marquis Fund, L.P.

	
284,891

	
$67,128.47

	
LMIF Investments, LLC

	
243,814

	
$57,449.67

	
SMF Investments, LLC

	
177,800

	
$41,894.48

	
Summerline Capital Partners, LLC

	
831

	
$195.87

	
Total

	
707,336

	
$166,668.49

 

 

 

12star_ex101.htm

EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of April 1st, 2012 (this “Employment Agreement”), by and between Starboard Resources Inc., a Delaware corporation (the “Company”), having a place of business at 300 E. Sonterra Blvd., San Antonio, Texas 78258, and Michael J. Pawelek, an individual residing at __________________.

RECITAL

WHEREAS, the Company desires to engage Employee’s services, and Employee desires to perform such services, upon the terms, and subject to the conditions, set forth herein.

NOW, THEREFORE, in consideration of the covenants and promises contained herein the compensation and benefits received by the Employee from the Company and the access given the Employee to the Company’s confidential information and the Company’s customers, and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and with the Company’s recognition of the knowledge and expertise provided by the Employee being acknowledged, the Company and the Employee hereby agree as follows:

 

	
1.  

	
Term of Employment.

 

Subject to the termination provisions set forth elsewhere in this Employment Agreement, the term of this Employment Agreement and the Employee’s employment hereunder shall be for a term of three (3) years from the date of this Employment Agreement (the “Employment Term”). This Employment Agreement and the parties’ obligations hereunder shall terminate at the end of the Employment Term, except as otherwise provided herein; for avoidance of doubt, at the end of the Employment Term, the Employee shall be an at-will employee of the Company if the Company and the Employee agree to such continued employment.

 

	
2.  

	
Position and Duties.

 

	
(a)  

	
During the Employment Term, the Employee shall serve as Chief Executive Officer. The Employee shall have such duties, functions, responsibilities, and authority as are from time to time delegated to the Employee by the Board of Directors of the Company (the “Board”) or are otherwise consistent with the duties, responsibilities and authority of the executive office held by the Employee; provided that with respect to any specifically delegated duties, functions, responsibilities and authority, such duties, functions, responsibilities, and authority are reasonable and customary for a person serving in a comparable office/position of a company comparable to the Company.

	
(b)  

	
During the Employment Term, the Employee shall: (i) devote substantially all of his time during normal business hours to the business of the Company, fulfill his duties and obligations under this Employment Agreement and use his best efforts, judgment and energy to perform, improve and advance the business and interests of the Company in a manner consistent with the duties of his position; provided, however, that Employee shall not be prevented from serving as a member of the board of directors of a corporation if the Company determines that such membership is not adverse to its interests; (ii) do such traveling as may be required in connection with the performance of such duties and responsibilities.

 

	

Employment Agreement - Michael J. Pawelek

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(c)  

	
In connection with the Employee’s employment by the Company under this Employment Agreement, the Employee shall be based at the principal executive offices of the Company, located as of the date hereof in San Antonio, Texas, except for such reasonable travel or field work as the performance of the Employee’s duties in the business of the Company may require. Notwithstanding the foregoing, the Board may, in its discretion, determine to relocate the principal offices of the Company for any necessary business purpose, and doing so shall not be a breach of this Employment Agreement.

	
3.  

	
Hours of Work.

The Employee’s normal days and hours of work shall coincide with the Company’s regular business hours. The nature of the Employee’s employment with the Company requires flexibility in the days and hours that the Employee must work, and may necessitate that the Employee works on other or additional days and hours. The Company reserves the right to require the Employee, and the Employee agrees, to work during other or further days or hours than the Company’s normal business hours.

	
4.  

	
Compensation and Benefits.

	
(a)  

	
Base Salary. During the Employment Term, the Company shall pay to the Employee for his services hereunder a base salary (“Base Salary”) at the rate of $200,000.00 per year, payable in installments in accordance with the general payroll practices of the Company, or as otherwise mutually agreed upon by the Company and the Employee, but no less often than twice monthly. The Employee’s Base Salary may be subject to such increase as may be determined from time to time by the Board in its sole discretion.

	
(b)  

	
Grant.

 

Employee shall be granted a restricted stock award for 116,550 shares of the Company’s Common Stock (representing 1% of the Company’s fully diluted capital stock as of March 1, 2012) which restricted stock award shall vest in full upon the earlier of (i) an IPO; (ii) a Business Combination; or (iii) March 1, 2015. The vesting condition shall require that Employee remain continuously in the Company’s employment pursuant hereto through the occurrence of such vesting event; provided, however, that such restricted stock award shall also vest in the event that any such vesting event occurs within 12 months following the termination of Employee’s employment in the event the Employee’s employment hereunder is terminated by the Company without Cause pursuant to Section 6(b) or by the Employee for Good Reason pursuant to Section 6(e). The Employee acknowledges and agrees that the award or vesting of the restricted stock award does not constitute an express or implied promise of continued employment for the vesting schedule set forth herein, for any period, or at all, and shall not otherwise as provided hereby interfere with the Company’s right to terminate this Agreement. For purposes of this Agreement, an “IPO” shall mean the closing of a sale of shares of the Common Stock of the Company to the public in an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933. For purposes of this Agreement, a “Business Combination” shall mean (i) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company (unless, immediately following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities of the Company), (ii) a sale or other disposition of all or substantially all of the assets of the Company, or (iii) an acquisition in one or more transactions of 50% or more of the voting power of the voting securities of the Company by any person or by two or more persons acting as a group, other than in the case of this clause (iii) for an acquisition of voting securities issued directly by the Company .

 

	

Employment Agreement - Michael J. Pawelek

	Page 2

  

  

  

	
(c)  

	
Performance Incentives.

In addition to the foregoing, Employee shall be entitled to receive incentive compensation payable as described below in the event any one or more of the following corporate objectives of the Company are achieved:

(i)             Business Combination:

In the event of a Business Combination during the period of Employee’s employment hereunder (or within 12 months following the termination of Employee’s employment in the event the Employee’s employment hereunder is terminated by the Company without Cause pursuant to Section 6(b) or by the Employee for Good Reason pursuant to Section 6(e), Employee shall be entitled to an incentive payment from the Company payable in the form of consideration received by the stockholders of the Company upon the closing of a Business Combination (or payable as the Company and Employee may otherwise agree, but not later than 60 days following such closing; provided, however, that if the stockholders of the Company receive their respective payments as a schedule of payments, then the payments will be made to Employee on the same schedule. Notwithstanding the above, in no event shall the payments be made later than five (5) years after the closing.) equal to (x) 0.75% of the Net Proceeds of the Business Combination if such Business Combination closes on or before September 1, 2012; or (y) 0.4% of the Net Proceeds of the Business Combination if such Business Combination closes on or before March 1, 2013. The Employee shall not be entitled to such incentive payment if the Business Combination closes on or after March 2, 2013 and the closing must be evidenced by an actual consummation, sale, disposition, acquisition or as otherwise contemplated by the Business Consummation. For purposes of this Section 4(c)(i), “Net Proceeds of the Business Combination” shall mean the proceeds actually received by the Company and/or its stockholders from a Business Combination in excess of the transaction costs related thereto and the aggregate consideration received by the Company for all issued and outstanding shares of capital stock (including all securities and instruments convertible there into);

(ii)            IPO:

In the event of an 1PO during the period of Employee’s employment hereunder (or within 12 months following the termination of Employee’s employment in the event the Employee’s employment hereunder is terminated by the Company without Cause pursuant to Section 6(b) or by the Employee for Good Reason pursuant to Section 6(e), Employee shall be entitled to the following, with such awards to be made as of the closing of the IPO:

(x)             An award of Common Stock equal to the number of shares obtained by multiplying 1.0% times the difference between the amount of the aggregate valuation of the Company’s capital stock at the time of an IPO minus the aggregate consideration received by the Company for all issued and outstanding shares of capital stock (including all securities and instruments convertible there into) and dividing the resulting product by the IPO price per share, with such restricted stock award to vest two years after date of IPO; and

(y)            Options to purchase a number of shares of Common Stock corresponding to 1.0% of the Company’s fully diluted capital stock (measured as of the IPO date), with such options to vest and become exercisable four years after the IPO. The stock option shall have an exercise price equal to 100% of the IPO price per share of the Common Stock. The stock option shall have a term of 10 years from the date of the IPO. The option shall provide for customary means of “cashless exercise” (in addition to a conventional exercise provision by payment of the exercise price in cash), such that if applicable the Employee may exercise the option either by surrendering for cancellation a portion of the option having a difference between the then current fair value of the option shares subject thereto and the exercise price of such surrendered option shares equal to the exercise price of the concurrently exercised portion of the option or, if the Company’s Common Stock is then publicly traded and a resale registration statement is then in effect for such option shares, by making provision for the exercise price payment to be coordinated by a concurrent sale through a broker retained by Employee. The option shall otherwise be awarded upon such terms as are reflected in the form of option, containing customary terms and provisions and not inconsistent with the provisions hereof, approved by the Board of the Company.

 

	

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(z)            Options to purchase a number of shares of Common Stock corresponding to 1.0% of the Company’s fully diluted capital stock (measured as of the second anniversary of the IPO date), with such options to vest and become exercisable six years after the IPO. The stock option shall have an exercise price equal to 100% of the closing sale price per share of the Common Stock on the principal exchange upon which it is then traded as of the second anniversary of the IPO (or the next succeeding business day, if the second anniversary is not a business day). The stock option shall have a term of 10 years from the second anniversary of the IPO. The option shall provide for customary means of cashless exercise (in addition to a conventional exercise provision by payment of the exercise price in cash), such that if applicable the Employee may exercise the option either by surrendering for cancellation a portion of the option having a difference between the then current fair value of the option shares subject thereto and the exercise price of such surrendered option shares equal to the exercise price of the concurrently exercised portion of the option or, if the Company’s Common Stock is then publicly traded and a resale registration statement is then in effect for such option shares, by making provision for the exercise price payment to be coordinated by a concurrent sale through a broker retained by Employee. The option shall otherwise be awarded upon such terms as are reflected in the form of option, containing customary terms and provisions and not inconsistent with the provisions hereof, approved by the Board of the Company.

	
(d)  

	
Conditions. All Board and stockholder approvals and other conditions necessary to avoid any adverse tax or securities law consequences or other adverse consequences associated with the above-referenced restricted stock awards, options or incentive payments, including without limitation any such consents under Internal Revenue Code (“Code”) Sections 162(m), 280G, 409A or otherwise or under Rule 16b-3 promulgated by the SEC, will be promptly and timely sought by the Company, and the Company shall use commercially reasonable efforts to ensure that principal investors affiliated with any of the directors will provide a support letter confirming their consent to such matters in connection with any Board approval hereof and thereof. In addition, it is the intent of the Company and the Employee that all payments, awards and benefits hereunder shall either be exempt from the application of, or comply with, the requirements of Section 409A and Section 280G of the Code and that no award shall be granted, deferred, accelerated, extended, paid out or modified under this Agreement in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon the Employee. This Agreement and all awards hereunder shall be construed to the greatest extent possible in a manner that effects such intent. In the event that it is reasonably determined by the Company or its Board that, as a result of Section 409A of the Code, any payment or delivery of shares in respect of any award of restricted stock or options under this Agreement may not be made at the time contemplated by the terms of this Agreement or the relevant award agreement, as the case may be, without causing the Employee to be subject to taxation under Section 409A of the Code, the Company will make such payment or delivery of shares on the first day that would not result in the Employee incurring any tax liability under Section 409A of the Code, and in the event any such award hereunder unavoidably becomes subject to tax under Section 409A or 280G, the Company will provide to Employee a cash bonus in an amount adequate to satisfy any such incremental tax liability on or before the payment due date with respect to such tax liability. The definition of Business Combination is intended to comply with the definition of “change of control” under Section 409A of the Code and, to the extent that the above definition does not so comply and the payments contemplated hereunder are subject to Section 409A of the Code, such definition shall be limited (but not expanded) to the extent required to ensure that this definition complies with the requirements of Section 409A of the Code, and no Business Combination shall be deemed to have occurred if a change of control has not occurred for purposes of Section 409A of the Code. The determination of whether such a change of control and Business Combination occurred will be objectively determined by the Company in a non-discretionary manner.

	
(e)  

	
Employee Benefits. During the Employment Term, the Employee shall be entitled to participate in all employee benefit plans (including executive bonus plans, cash bonus awards and long-term incentive plans), programs and arrangements that are generally made available by the Company to its senior executives. In addition to the rights of the Employee set forth in the preceding sentence, the Company shall provide health, dental, disability and life insurance for the Employee under such group health, dental, disability and life insurance plans maintained by the Company for its full-time, salaried employees (subject to the terms and conditions thereof). Nothing herein shall require the Company to adopt or maintain any type of benefit plan or policy; provided, however, the Company shall provide health insurance for the Employee and his family at all times during the Employment Term and shall at a minimum continue such D&O insurance coverage as may be currently in place. The Employee acknowledges that any such plan or policy will be subject to deductibles and co-pay requirements.

 

	

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(f)  

	
Expenses. During the Employment Term, the Employee shall be entitled to receive reimbursement upon a timely basis (according to the then-current practices of the Company) for all reasonable and necessary out-of-pocket expenses incurred by the Employee in connection with performing his duties and responsibilities hereunder, that are reimbursable in accordance with the Company’s policies from time to time in effect, upon the presentation by the Employee of an itemized monthly accounting of such expenditures, including receipts where required by Company policy or federal income tax regulations.

 

	
5.  

	
Vacation.

The Employee shall be entitled to accrue, pro rata, fifteen (15) vacation days for each annual period during the Employment Term. Vacation days shall be used during the applicable annual period in which they are accrued. The Employee shall be entitled to carry over up to five (5) accrued vacation days from one annual period to the next and all the rest of the accrued vacation time that the Employee does not use during the applicable annual period in which they were accrued shall be forfeited unless the Company shall have requested the Employee, in writing, to modify or postpone a previously planned vacation.

 

	
6.  

	
Termination of Employment.

 

	
(a)  

	
For Cause. The Company may terminate the Employee’s employment at any time hereunder for Cause (as defined below) (a “For Cause Termination”) upon written notice to the Employee. For purposes of this Employment Agreement, “Cause” means any of the following:

	
(i)  

	
Dishonesty by the Employee in the performance of his duties and obligations to the Company and its affiliates;

	
(ii)  

	
the Employee’s conviction of, or entering a plea of guilty, nolo contendere or comparable plea to, any felony or to any misdemeanor involving moral turpitude;

	
(iii) 

	
a breach by the Employee of any material covenant contained in this Employment Agreement or any other agreement between the Company and Employee that is to be observed or performed by the Employee, and the Employee fails to cure such breach or its effects within 30 days of receiving written notice from the Company specifying the facts which constitute Cause under this subsection;

	
(iv)  

	
willful misconduct, bad faith, fraud, or gross negligence by the Employee in the conduct of the Employee’s responsibilities for the Company, any of its subsidiaries; or

	
(v)  

	
the commission by the Employee of an act of fraud, embezzlement against or similar crime against any individual or entity.

	
(b)  

	
Without Cause. The Company may in its sole and absolute discretion terminate Employee’s employment hereunder at any time without Cause for any or no reason. For purposes of this Employment Agreement, a “Without Cause Termination” means a termination by the Company of Employee’s employment hereunder other than pursuant to a For Cause Termination. For avoidance of doubt, termination by reason of Disability is not a termination by the Company.

	
(c)  

	
Death. The Employee’s employment hereunder shall terminate automatically upon his death.

 

	

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(d)  

	
Disability. If the Disability (as defined below) of the Employee occurs during the Employment Term, the Company may notify the Employee of the Company’s intention to terminate the Employee’s employment hereunder for Disability. In such event, the Employee’s employment hereunder shall terminate effective on the 30th day following the date such notice of termination is received by the Employee (the “Disability Effective Date”). For purposes of this Employment Agreement, the “Disability” of the Employee shall be deemed to have occurred at such time as the Board determines, in its reasonable discretion, (i) that despite any reasonable accommodation required by law, the Employee is unable to perform the essential functions of his position hereunder as a result of his physical or mental incapacity and (ii) that such inability has existed or is likely to exist for a period of ninety (90) days or more in any twelve (12) month period or for sixty (60) consecutive days.

	
(e)  

	
Termination by the Employee for Good Reason. The Employee may terminate his employment hereunder if (i) there occurs a material breach by the Company of any provision of this Employment Agreement; or (ii) the Employee’s Base Salary is reduced; or (iii) the Company’s Board of Directors, in its reasonable discretion, determines to relocate the principal offices of the Company out of San Antonio, Texas, for any necessary business purpose, provided that the Employee has given the Company written notice within ninety (90) days of the occurrence of any event described in (i) through (iii) hereof and the event is not cured within thirty (30) days after such notice, and the Employee terminates his employment hereunder within thirty (30) days of the expiration of the aforesaid thirty (30) day cure period. For purposes of this Employment Agreement, a “Good Reason Termination” means a termination by the Employee of Employee’s employment hereunder pursuant to this Section 6(e).

	
(f) 

	
Notice of Termination. Any termination of the Employee’s employment hereunder by the Company or by the Employee (other than a termination pursuant to Section 6(c)) shall be communicated by a Notice of Termination (as defined below) to the other party hereto. For purposes of this Employment Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Employment Agreement relied upon, (ii) in the case of a termination for Disability or a For Cause Termination or a Good Reason Termination, 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 (iii) specifies the Employment Termination Date (as defined in Section 6(g) below). The failure by the Company or Employee, as applicable, to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Disability, Cause or Good Reason shall not waive any right of the Company or Employee hereunder or preclude the Company or Employee from asserting such fact or circumstance in enforcing the Company’s or Employee’s rights hereunder.

	
(g)  

	
Employment Termination Date. For purposes of this Employment Agreement, “Employment Termination Date” means the effective date of termination of the Employee’s employment hereunder, which date shall be (i) if the Employee’s employment is terminated by his death, the date of his death, (ii) if the Employee’s employment is terminated because of his Disability, the Disability Effective Date, (iii) if the Employee’s employment is terminated by the Company pursuant to a For Cause Termination, the date specified in the Notice of Termination, (iv) if the Employee’s employment is terminated by the Company pursuant to a Without Cause Termination, the date specified in the Notice of Termination, (iv) if the Employee’s employment is terminated by the Employee pursuant to a Good Reason Termination, the date on which the Notice of Termination is given (unless the Company and Employee agree upon any different Employment Termination Date), and (v) otherwise, the date on which the Notice of Termination is given, and if none is given, then the date recorded by the Company as the date of termination for purposes of its payroll records.

 

	

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In addition, Employee’s employment is considered terminated only if it meets the definition of a “separation from service” within the meaning of Code Section 409A, and references to termination of employment shall be deemed to refer to a separation from service.

 

	
(h)        

	
Resignation. In the event of termination of the Employee’s employment hereunder for any reason whatsoever other than the death of the Employee, the Employee agrees that if at such time he is a member of the Board of Directors or an officer of the Company or a director or officer of any of the Company’s subsidiaries, he shall promptly deliver to the Company his written resignation from all such positions, such resignation to be effective as of the Employment Termination Date.

	
(i)        

	
Other Obligations. Upon any termination of the Employee’s employment with the Company, the Employee shall promptly resign from any position with the Company or any affiliate of the Company, and shall comply with any other agreement between the Company and Employee. Further, following any termination of the Employee’s employment with the Company, upon the Company’s request the Employee will provide transition services to the Company without additional compensation beyond the payments contemplated in section 7(d) for terminations covered by Sections 6(b) or 6(e) and with such additional compensation based upon an appropriate prorated allocation of then current Base Salary in all other cases, but subject to reasonable adjustment and accommodation for any new consulting or employment arrangements to which Employee is then subject (in all cases such required transitional services to be less than fifty percent (50%) of the average level of services provided by the Employee during the six (6) month period immediately preceding the date of termination (or the length of employment, if shorter)) for up to thirty (30) days following the date the Employee’s employment terminates. Upon presentation of appropriate documentation, the Company shall pay or reimburse the Employee for all reasonable out-of-pocket expenses incurred by the Employee in complying with the foregoing sentence.

	
(j)  

	
Release; No Mitigation. The amounts payable and benefits provided to the Employee pursuant to Section 7, other than the accrued benefits unpaid through the Employment Termination Date, shall only be payable or provided if within thirty (30) days following the date of termination the Employee or the Employee’s representative, as the case may be, executes and delivers to the Company a fully effective and irrevocable agreement and general release in the form reasonably prepared by the Company, which the Company shall provide to the Employee or the Employee’s representative, as applicable, within seven (7) days following the date of termination.

	
7.  

	
Company Obligations Upon Termination of Employment.

	
(a)  

	
Death. If the Employee’s employment hereunder is terminated during the Employment Term by reason of the Employee’s death, the Company shall pay to the Employee’s estate, in a lump sum in cash within thirty (30) days after the Employment Termination Date, a sum equal to the Employee’s accrued and unpaid Base Salary, reimbursable expenses and vacation accrued but unpaid in each case through the Employment Termination Date, plus Base Salary and benefits for a period equal to the lesser of six (6) months and the remainder of the then current Employment Term, at the regularly scheduled payment intervals following the Employment Termination Date, and thereafter the Company shall have no further obligation to the Employee under this Employment Agreement except as otherwise expressly provided herein.

 

	
(b)  

	
Disability. If the Employee’s employment hereunder is terminated during the Employment Term by reason of the Employee’s Disability, the Company shall pay to the Employee, in a lump sum in cash within thirty (30) days after the Employment Termination Date, a sum equal to the Employee’s accrued and unpaid Base Salary, reimbursable expenses and vacation accrued but unpaid in each case through the Employment Termination Date, and thereafter the Company shall have no further obligation to the Employee under this Employment Agreement, except as otherwise expressly provided herein. In addition, the Company shall continue to provide at its expense group medical and dental insurance, as in effect on the Employment Termination Date, to the Employee and to the Employee’s immediate family for a period of six (6) months after the Employment Termination Date.

 

	

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(c)  

	
For Cause Termination. If the Employee’s employment hereunder is terminated during the Employment Term pursuant to a For Cause Termination, the Company shall pay to the Employee, in a lump sum in cash within thirty (30) days after the Employment Termination Date, the Employee’s accrued and unpaid Base Salary, reimbursable expenses and vacation accrued but unpaid in each case through the Employment Termination Date, to the extent not theretofore paid, and, thereafter, the Company shall have no further obligations to the Employee under this Employment Agreement.

	
(d)  

	
Without Cause Termination and Good Reason Termination. If the Employee’s employment hereunder is terminated during the Employment Term by reason of a Without Cause Termination or a Good Reason Termination pursuant to Section 6(e), the Company shall pay to the Employee the Employee’s Base Salary for a period equal to the lesser of one (1) year and the remainder of the then current Employment Term, at the regularly scheduled payment intervals following the Employment Termination Date, and shall pay within thirty (30) days following the Employment Termination Date all reimbursable expenses and vacation accrued but unpaid in each case through the Employment Termination Date and shall continue to provide group medical and dental insurance at the Company’s expense, as in effect on the Employment Termination Date, to the Employee and to the Employee’s immediate family during such period equal to the lesser of one (1) year and the remainder of the then current Employment Term and thereafter the Company shall have no further obligation to the Employee under this Employment Agreement except as otherwise expressly provided herein. For purposes hereof, if the Company is a party to a Business Combination and this Agreement is not assumed by the surviving entity or successor in such Business Combination, Employee shall be entitled to treat this Agreement as terminated pursuant to a Without Cause Termination for purposes hereof (and if this Agreement is assumed, then this Agreement shall apply to such successor entity as though it is the “Company” for purposes hereof, including with respect to any headquarters relocation or other grounds for Good Reason termination under Section 6(e) hereof).

	
8.  

	
Nondisclosure of Confidential and Proprietary Information.

During the Employment Term, the Employee agrees to the following:

	
(a)  

	
The Employee acknowledges that during the Employment Term, the Employee will have access to and possession of trade secrets, confidential information, and proprietary information (collectively, as defined more extensively below, “Confidential Information”) of the Company, its parents, subsidiaries and affiliates and their respective customers, suppliers and other third parties that do business with them. The Employee recognizes and acknowledges that this Confidential Information is valuable, special and unique to the Company’s business, is owned solely by and is the exclusive property of the Company, is to be used only for the Company’s benefit, and that access to and knowledge thereof are essential to the performance of the Employee’s duties to the Company. During the Employment Term the Employee shall keep secret and shall not use or disclose, reveal, transfer, reproduce, sell, capitalize upon or take advantage of such Confidential Information relating to the Company, its customers, suppliers or other third parties that do business with it except at the request of the Company, and in addition, the Employee shall exercise all reasonable efforts and precautions to prevent such disclosure, breach of confidentiality, or other conduct or action inconsistent herewith; provided, however, that Confidential Information may be disclosed to the extent (i) required by law or court order or (ii) generally available to the public other than by unauthorized disclosure.

 

	

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(b)  

	
The term “Confidential Information,” means information in whatever form, be it written, digital, graphic, electronically stored, orally transmitted or memorized concerning:

	
(i)  

	
the Company’s business or operations plans, strategies, portfolio, prospects or objectives;

	
(ii)  

	
the Company’s structure, products, product development, technology, distribution, sales, services, support and marketing plans, practices, and operations;

	
(iii)  

	
the prices, costs, and details of the Company’s services;

	
(iv)  

	
research and development, new products, licenses, operations or plans;

	
(v)  

	
customers and customer lists, including (A) present customers, customer files and records, and (B) potential customers, prospects or targets (including without limitation, the identities of customers, names, addresses, contact, persons and the customers’ business status or needs) that the Company has identified as potential customers, prospects or targets prior to the termination of Employee’s employment for any reason under this Employment Agreement;

	
(vi)  

	
information regarding the skills, compensation and benefits of other employees of the Company;

 

	
(vii)  

	
financial records, unpublished financial statements, financial condition, results of the Company’s operations and related information about the Company;

	
(viii)  

	
any other financial, commercial, business or technical information related to any of the products or services made, developed or sold by the Company or its customers.

	
(c)  

	
Employee does not have an obligation to treat any information as Confidential Information that is: (A) in the public domain through no act, omission or fault of the Employee; (B) within the legitimate possession of the Employee prior to the date hereof, with no confidentiality obligations to a third party; (C) lawfully received from a third party having rights in the information without restriction, and without notice of any restriction against its further disclosure or use; (D) independently developed by the Employee without breaching this Agreement; or (E) disclosed or used by Employee with the prior written consent of the Company. If Confidential Information is required or requested to be produced by law, court order, governmental authority or other third party, the Employee shall immediately notify the Company of that requirement or request and shall assist the Company in obtaining a protective order or other appropriate relief to prevent such production. The burden of establishing the existence of these exceptions shall be the Employee’s.

 

	

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(d)  

	
The Employee further recognizes that the Company has received and in the future will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes, and Employee shall disclose all such Third Party Information to the Company. During the Employment Term and thereafter, the Employee shall hold Third Party Information in the strictest confidence and shall not disclose to anyone (other than Company personnel who need to know such information in connection with their work for the Company) or use, except in connection with work for the Company, Third Party Information unless expressly authorized by the Company in writing.

 

	
9.  

	
No Conflicting Obligations.

 

The Employee represents and warrants that the Employee has the full right and authority to enter into this Employment Agreement and to render the services as required under this Employment Agreement, and that the execution, delivery, and performance by the Employee of this Employment Agreement do not and will not conflict with or result in a violation of any provision of, or constitute a default under, any contract, agreement, instrument, or obligation to which the Employee is a party or by which the Employee is bound, including any agreement to keep in confidence information acquired by the Employee in confidence or in trust prior to employment by the Company. The Employee shall not enter into any agreement or business relationship or incur any obligations to any third party following the date hereof that may conflict with, or interfere with the Employee’s abilities to perform, the Employees duties and responsibilities pursuant to this Employment Agreement.

	
10.  

	
Return of Company Property.

 

When the Employee leaves the employ of the Company, the Employee shall deliver to the Company any and all devices, records, recordings, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, computer materials, equipment, other documents or property, together with all copies thereof (in whatever medium recorded), belonging to the Company, its successors or assigns.

 

	
11.  

	
Noncompetition.

 

The Employee acknowledges that the Employee performs services of a unique nature for the Company that are irreplaceable, and that the Employee’s performance of such services for a competing business may result in irreparable harm to the Company. Accordingly, during the Restricted Period (as defined below), the Employee shall not, directly or indirectly, own, manage, operate, control, be employed by (whether as an employee, consultant, manager, agent, broker, independent contractor, director, officer or otherwise, and whether or not for compensation) or render services to any Person or become a member of any business organization (including as a stockholder, member, investor, owner, lender, partner, joint venturer, licensor, licensee or distributor), in whatever form, engaged in the Business (as defined below) or that provides a service in competition with any product or service being sold or under development, during the period of the Employee’s employment with the Company, by the Company or any of its subsidiaries; provided that such product or service is or was known to the Employee during his employment or at the time of the termination of his employment. Notwithstanding the foregoing, nothing herein shall prohibit the Employee from being a passive owner of not more than five percent (5%) of the equity securities of a publicly traded company or serving on the board of directors or similar governing body of any entity which is publicly traded that is engaged in the Exclusive Business, so long as the Employee has no active participation in the business of such corporation. In addition, the provisions of this Section 11 shall not be violated by the Employee commencing employment with a subsidiary, division or unit of any entity that engages in the Exclusive Business so long as the Employee and such subsidiary, division or unit does not, and does not have plans to, engage in the Exclusive Business. The “Restricted Period” means the duration of the Employee’s employment with the Company. The “Business” means the acquisition, development and exploration for oil and gas assets in the areas in which the Company has conducted or contemplates conducting exploration and production activities and other businesses which are ancillary thereto and in which the Company is actually engaged during the term of this Agreement.

 

	

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12.  

	
Nonsolicitation.

 

During the Restricted Period, the Employee shall not, except in the furtherance of the Employee’s duties hereunder or otherwise in the interests of the Company, directly or indirectly, individually or on behalf of any other person, solicit, hire, employ, or retain any person who (x) is then, or was at any time within the immediately preceding six (6) months, employed by or a substantially full-time consultant to or an exclusive consultant to the Company or any of its subsidiaries, or (y) is then, or who was an-investor in, or a client or customer of, the Company or any of its subsidiaries; provided, however, that the restriction contained in this Section 12 shall not apply to (i) any such employee or consultant who was terminated from providing such services by the Company or its subsidiary; (ii) general solicitations via newspaper advertisements and other customary employment advertising media not targeted at such employees or consultants (or to the hiring or employment of a person who responds to such a solicitation or advertising); and (iii) the Employee soliciting, hiring or employing his personal administrative assistant.

 

	
13.  

	
Nondisparagement.

 

During the Employee’s employment with the Company and for a period of three (3) years thereafter, the Employee shall not knowingly, directly or indirectly, make negative comments or otherwise disparage the Company or any of its subsidiaries or their affiliates, or any of their respective officers, directors, employees, shareholders, agents or products in any manner likely to be harmful to them or their business reputations or personal reputations other than while employed by the Company in the good faith performance of the Employee’s duties to the Company. The foregoing will not prevent the Employee from making any good faith truthful comment or statement to the extent (i) necessary to rebut any untrue public statements made by the Company; (ii) necessary with respect to any litigation, arbitration or mediation involving the enforcement of this Agreement; or (iii) in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings, including depositions in connection with such proceedings (provided that the party making such statement or comment provides the other party with prior notice of the foregoing to the extent possible and reasonably cooperates with the other party in seeking a protective order or other appropriate protection against making such statement or comment).

 

	
14.  

	
Notices.

 

Any notices, requests, demands or other communications required or permitted under this Employment Agreement shall be in writing and shall be deemed to have been given when delivered personally or three (3) days after being mailed by certified mail, return receipt requested, addressed to the party being notified at the address of such party first set forth herein, or at such other address as such party may hereafter have designated by notice; provided, however, that any notice of change of address shall not be effective until its receipt by the party to be charged therewith.

 

	
15.  

	
Miscellaneous.

 

	
(a)  

	
Each party represents, warrants and covenants to the other party that this Employment Agreement constitutes the legal, valid and binding obligation of such party making such representation, warranty or covenant, enforceable in accordance with its terms, and the execution, delivery and performance of this Employment Agreement by such party does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which such party is a party or any judgment, order or decree to which such party is subject. Furthermore the Employee represents, warrants and covenants to the Company that he is not a party to or bound by any employment agreement, noncompetition agreement or confidentiality agreement with any Person that would be inconsistent with the terms hereof.

	
(b)  

	
Telephones, stationery, postage, e-mail, the internet and other resources made available to the Employee by the Company are solely for the furtherance of the Company business.

 

	

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(c)  

	
All construction and interpretation of this Employment Agreement shall be governed by and construed in accord with the internal laws of the State of Texas, without giving effect to that State’s principles of conflicts of law and any dispute arising with respect to the provisions hereof shall be subject to mandatory venue in the federal or state courts located in San Antonio, Bexar County, Texas.

	
(d)  

	
The Employee and the Company agree that if any provision of this Employment Agreement is deemed unenforceable or invalid by any court of competent jurisdiction, such provision shall be reformed and modified to make such provision valid and to permit enforcement of the objectionable provision to the fullest permissible extent. It is the intent of the Company and the Employee that this Employment Agreement be enforced to the fullest extent permitted by applicable law. Any provision of this Employment Agreement deemed unenforceable after modification shall be deemed stricken from this Employment Agreement, with the remainder of the Employment Agreement being given its full force and effect. If any term or other provision of this Employment Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Employment Agreement shall nevertheless remain in full force and effect.

	
(e)  

	
Any waiver granted by a party of any breach of or failure to comply with any provision or condition of this Employment Agreement by the other party shall not be construed as, or constitute, a continuing waiver of such provision or condition, or a waiver of any other breach of, or failure to comply with, any other provision or condition of this Employment Agreement, any such waiver to be limited to the specific matter and instance for which it is given. No waiver of any such breach or failure or of any provision or condition of this Employment Agreement shall be effective unless in a written instrument signed by the party granting the waiver.

	
(f)  

	
The Employee and the Company independently have made all inquiries regarding the qualifications and business affairs of the other which either party deems necessary. The Employee affirms that the Employee is knowledgeable and sophisticated as to business matters, including the subject matter of this Employment Agreement, and has read and fully understands this Employment Agreement’s meaning and legally binding effect. The Employee further affirms that, prior to assenting to the terms of this Employment Agreement, the Employee had been provided with a reasonable time to review it, consult with counsel of the Employee’s own choice, and to negotiate at arm’s length with the Company as to the contents of the Employment Agreement. The Employee further affirms that the provisions in this Employment Agreement represent accurately the expression of the parties’ mutual intent, and that the Employee has entered into this Employment Agreement freely and voluntarily and without pressure or coercion from anyone. Each party assumes the risk of any misrepresentation or mistaken understanding or belief relied upon by either party in entering into this Employment Agreement. In resolving any dispute or construing any term or provision in this Employment Agreement, there shall be no presumption made or inference drawn because of the inclusion of a provision not contained in a prior draft or the deletion of a provision contained in a prior draft. The parties acknowledge and agree that this Employment Agreement was negotiated and drafted with each party being represented by competent counsel of its choice and with each party having an opportunity to participate in the drafting of the provisions hereof and shall therefore be construed as if drafted jointly by the parties.

	
(g)  

	
The Company and the Employee agree that the Employee’s obligations to the Company during the Employee’s employment with the Company, as well as any other obligation of the Employee under this Employment Agreement, may be assigned to any successor in interest to the Company or any division or affiliate of the Company in its sole discretion and without additional consideration or prior notice to the Employee, but that nothing requires the Company to do so (and if this Agreement is assigned to an affiliated entity, then both the Company and such assignee entity shall continue to be bound hereby and treated as the “Company” for purposes hereof, and if this Agreement is assigned to an entity that is a successor to all or substantially all of the Company’s business and that is not previously affiliated with the Company, then this Agreement shall apply to such successor entity as though it is the “Company” for purposes hereof). The Employee’s obligations under this Employment Agreement are personal in nature and may not be assigned by the Employee to any other person or entity.

 

	

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(h)  

	
This Employment Agreement and any amendments hereto may be executed and delivered in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when counterparts have been signed by each party hereto and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. In the event that any signature to this Employment Agreement or any amendment hereto is delivered by facsimile transmission or by e-mail delivery of a “.pdf format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf signature page were an original thereof. At the request of any party, each other party shall promptly re-execute an original form of this Employment Agreement or any amendment hereto and deliver the same to the other party. No party hereto shall raise the use of a facsimile machine or e-mail delivery of a “.pdf’ format data file to deliver a signature to this Employment Agreement or any amendment hereto or the fact that such signature was transmitted or communicated through the use of a facsimile machine or e-mail delivery of a “.pdf’ format data file as a defense to the formation or enforceability of a contract, and each party hereto forever waives any such defense.

	
(i)  

	
The headings herein are for convenience of reference and shall not form part of, or affect the interpretation of, this Employment Agreement.

[Remainder of page intentionally left blank. Signature page follows.]

 

 

 

 

	

Employment Agreement - Michael J. Pawelek

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IN WITNESS WHEREOF, the parties have executed and delivered this Employment Agreement on the date first above written.

 

	 	STARBOARD RESOURCES LLC 

By:__________________________________________

Name:________________________________________

Title:_________________________________________

EMPLOYEE:

____________________________________________

Michael J. Pawelek

	 	 
	 	 

 

	

Employment Agreement - Michael J. Pawelek

	Page 14

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