THIS AGREEMENT is
made and entered into as of the 3rd day of February, 2009, by and
between MAGELLAN PETROLEUM CORPORATION, a Delaware corporation (the
“Company”), and William H. Hastings, an individual
residing at 2 Thurston Lane, Falmouth, Maine 04105 (the
“Executive”).
WHEREAS, the
Executive commenced employment with the Company on
December 11, 2008 (the “Effective Date”) and is
current serving as its President and Chief Executive Officer;
and
WHEREAS, the
Company and the Executive (the “Parties”) desire to
enter into this agreement (the “Agreement”) setting
forth the terms and conditions of the Executive’s employment;
and
WHEREAS, the
Parties are also entering into two non-qualified stock option award
agreements (the “Option Agreements”) and an
indemnification agreement (the “Indemnification
Agreement”);
NOW, THEREFORE, in
consideration of the premises and mutual covenants contained herein
and for other good and valuable consideration, the Parties,
intending to be legally bound, agree as follows:
1.1 The Company
hereby agrees to employ the Executive, and the Executive hereby
accepts employment with the Company in accordance with the terms
and provisions of this Agreement.
1.2 The term of
employment this Agreement (“Term”) shall be the period
commencing as of the Effective Date and ending on the earlier of:
(a) December 11, 2013 (the 5 th anniversary of the Effective Date); or
(b) the date of termination of the Executive’s
employment pursuant to Sections 5, 6 or 7 below, whichever is
applicable. If not terminated earlier than December 11, 2013
in accordance with Sections 5, 6 or 7 below, the Company shall
provide the Executive written notice not less than six
(6) months prior to December 11, 2013 of the
Company’s intention to either (i) permit this Agreement
to terminate on such date or (ii) renew the Executive’s
employment with the Company in the offices described below in
Section 2.1. If the Company notifies the Executive of its
intention to renew this Agreement, the Company and the Executive
shall in good faith negotiate the duration and other terms of the
Executive’s continued employment with the Company. Upon
termination of this Agreement for any reason, the obligations of
Company under this Agreement shall cease and Employee shall forfeit
all right to receive any compensation or other benefits under this
Agreement, except the amounts described in Sections 6, 7, 8 or
9 of this Agreement.
2.1 Offices
. As of the Effective Date, the Executive has assumed the positions
of President and Chief Executive Officer of the Company. It is the
intention of the Parties that during the Term hereof, the Executive
will continue to serve as President and Chief Executive Officer of
the Company and will devote substantially all of his business time
and attention and best efforts to the affairs of the Company and
its subsidiaries and his duties; provided, however , that
Executive may continue to participate, on a part time basis, as
(i) a director of a floating liquefied natural gas company and
(ii) as a consultant to a methanol company (“Permitted
Activities”) so long as such Permitted Activities do not
constitute an actual or potential conflict of interest with the
Company’s business in the judgment of the Board. The
Executive will have such duties as are appropriate to his position,
and will have such authority as required to enable the Executive to
perform these duties. Consistent with the foregoing, the Executive
shall comply with all reasonable instructions of the Board of
Directors of the Company (the “Board”) or a committee
thereof. Nothing in this Agreement shall prevent the Executive from
(i) participating in charitable, civic, educational,
professional, community or industry affairs or, with prior written
approval of the Board, serving on the board of directors or
advisory boards of other companies; and (ii) managing the
Executive’s and the Executive’s family’s personal
investments so long as such activities do not materially interfere
with the performance of the Executive’s duties hereunder or
create a potential business conflict or the appearance
thereof.
2.2 Office
Location . The Company expects to relocate its principal
executive offices to Portland, Maine during the first quarter of
2009. Until the relocation has been effectuated, the Executive
shall be permitted to work from his home in the Portland, Maine
area.
2.3 Board
Service . The Executive was elected to the Company’s
Board as a Class II director of the Company, as of the
Effective Date. The Board has also determined to nominate Executive
for a three-year term of office as a Company director, commencing
at the 2008 annual meeting of shareholders and expiring at the 2011
annual meeting of shareholders. During the Term of this Agreement,
the Board shall nominate the Executive from time to time, as a
director of the Company for reelection as a Class II director,
each time the members of such Class stand for election thereafter.
In addition, the Company, as the sole stockholder of Magellan
Petroleum Australia Limited (“MPAL”), will recommend to
the MPAL Board of Directors that the Executive be elected to the
MPAL Board of Directors promptly.
3.
Compensation and Benefits .
3.1 Salary
. During the Term of this Agreement, the Company shall pay the
Executive a base salary at an initial annual rate of Three Hundred
Thousand Dollars ($300,000). Beginning July 1, 2009 and effective
each July 1 st thereafter during the Term of this Agreement,
the Executive’s salary shall be increased by a percentage
amount that shall not be less than the greater of (i) 4% per
year or (ii) the percentage increase in the Bureau of Labor
Statistics’ announced Consumer Price Index for All Urban
Consumers, All Items (the “CPI-U”), unadjusted, for the
12-month period ending on the June 30 th immediately preceding the July 1
st on which such salary increase is scheduled to
take effect. The first increase to the Executive’s base
salary as of July 1, 2009 shall consist of a pro rata seven
(7) month portion of the increase
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described in
the immediately preceding sentence. By way of example only, if the
CPI-U, unadjusted, increased during the 12-month period ending
June 30, 2010, by 4.2%, then the increase for the
Executive’s salary effective on July 1, 2010 shall be
4.2%. The Company may, in its sole and absolute discretion, further
increase the Executive’s base salary in light of the
Executive’s performance, inflation, changes in the cost of
living and other factors deemed relevant by the Board. The
Executive’s base salary will be paid in accordance with the
standard practices for other members of senior management of the
Company, but not less frequently than monthly.
3.2 Bonuses
. During the Term hereof, the Executive will be eligible to receive
such bonus awards, if any, as shall be determined by the Board in
its sole and absolute discretion after receiving the recommendation
of the Compensation Committee.
(a) On the
Effective Date, the Executive was granted two non-qualified stock
options (the “Stock Options”) under the Magellan
Petroleum Corporation 1998 Stock Option Plan, as amended on
October 24, 2007 and further amended and restated by the Board
of Directors on December 11, 2008 (the “Stock Incentive
Plan”), which Stock Options entitle the Executive to purchase
an aggregate of three million, one hundred thousand (3,100,000)
shares of Common Stock of the Company. Effective February 2,
2009, the Executive has agreed to surrender an aggregate of 387,500
of the non-qualified stock options previously granted to the
Executive on December 11, 2008, 262,500 of which shall be
deemed to come from tranche one (time-based Options) and 125,000 of
which shall be deemed to come from tranche two (performance vesting
Options) (such 387,500 options, the “Surrendered
Options”).
(b) The terms
and conditions of the Stock Options are set forth in the Option
Agreements, the form and content of which are substantially similar
to the option agreements evidencing other awards under the Stock
Incentive Plan. The Executive acknowledges and agrees that the
award of the Stock Options is expressly conditioned on the receipt
of shareholder approval in accordance with the terms of the Option
Agreements, the Incentive Plan and listing standards of the Nasdaq
Stock Market, Inc.
(c) Future
awards of equity under the Incentive Plan (or any successor plan),
if any, shall only be made by the Board in its sole discretion,
after receipt of a recommendation by the Compensation
Committee.
3.4 Benefit
Programs . The Executive will be entitled to participate on
substantially the same terms as other members of senior management
of the Company in all employee benefit plans and programs of the
Company (other than any severance plan, program or policy), subject
to any restrictions or eligibility requirements under such plans
and programs, from time to time in effect for the benefit of senior
management of the Company, including, but not limited to,
retirement plans, profit sharing plans, group life insurance,
hospitalization and surgical and major medical coverages,
short-term and long-term disability.
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(a) During
the Term hereof, the Company shall reimburse the Executive a
maximum of $8,000 per year for family health insurance coverage,
which shall consist of medical, prescription and dental benefits.
Reimbursements under this paragraph shall be made no later than the
end of the year following the year in which such expenses were
incurred by the Executive. The expenses eligible for reimbursement
during the Executive’s taxable year may not affect the
expenses eligible for reimbursement in any other year, and the
right to reimbursement is not subject to liquidation or exchange
for another benefit.
(b) The
Company shall purchase a long-term disability insurance policy with
coverage to age 65 for the Executive, such policy to be mutually
selected by the Company and the Employee, and shall pay the annual
premiums under such policy in an annual amount not to exceed
$12,500.
(c) In
addition, the Company shall purchase a ten-year, term life
insurance policy for the Executive, such policy to be mutually
selected by the Company and the Employee, with aggregate coverage
of $1.5 million and shall pay the annual premiums under such
policy in an annual amount not to exceed $3,000.
3.6 Vacations
and Holidays . During the Term of this Agreement, the Executive
will be entitled to vacation leave of four (4) weeks per year
at full pay or such greater vacation benefits as may be provided
for by the Company’s vacation policies applicable to senior
management. The Executive will be entitled to such holidays as are
established by the Company for all employees.
3.7
Automobile . The Company will provide the Executive with a
leased automobile as approved by the Board of Directors as per the
Company’s perquisites policy from time to time.
4. Business
Expenses . The Executive will be entitled to prompt
reimbursement for all reasonable, documented and necessary expenses
incurred by the Executive in performing his services hereunder in
accordance with the policies of the Company, provided that the
Executive properly accounts therefor in accordance with the
policies and procedures established by the Company.
5.
Separation from Service . No termination shall be deemed to
have occurred under this Agreement unless there has been a
“Separation from Service” as defined under
Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), and the term “termination of
employment” and the like shall be construed to mean
“Separation from Service” as so defined.
6.
Termination of Employment by the Company .
6.1 Termination
by the Company Other Than For Disability or Cause . The Company
may terminate the Executive’s employment at any time for any
reason other than (i) by reason of the Executive’s
Disability (as defined in Section 6.2(c) hereof) or
(ii) for Cause (as defined in Section 6.3(a) hereof), by
giving the Executive a written notice of termination at least
thirty (30) days before the date of termination (or such
lesser notice period as the Executive may agree to).
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In the event of
such a termination of employment pursuant to this Section 6.1,
the Executive shall be entitled to receive the Severance Benefits
described in Section 9 of this Agreement.
6.2 Termination
Due to Disability .
(a) If the
Executive incurs a Disability, as defined below, the Company may
terminate the Executive’s employment by giving the Executive
written notice of termination at least thirty (30) days before the
date of such termination (or such lesser notice period as the
Executive may agree to). In the event of such termination of the
Executive’s employment because of Disability, the Executive
shall be entitled to receive (i) his base salary pursuant to
Section 3.1 through the date of such termination of
employment, plus his base salary for the period of any vacation
time earned but not taken for the year of termination of
employment; (ii) any other compensation and benefits to the
extent actually earned by the Executive under any other benefit
plan or program of the Company as of the date of such termination
of employment, such compensation and benefits to be paid at the
normal time for payment of such compensation and benefits to the
extent not previously paid, and (iii) any reimbursement
amounts owing under Section 4 hereof.
(b) In
addition, in the event of such Disability, the Executive and/or his
designated beneficiaries shall receive the insurance benefits owed
to them under the long-term disability insurance provided by the
Company under Section 3.5(b) hereof.
(c) For
purposes of this Agreement, the term “Disability” shall
mean a “long-term disability” as defined in the policy
of long-term, disability insurance provided by the Company under
Section 3.5(b) hereof.
(d) If
(i) the Executive incurs a Disability, as defined above;
(ii) the Company terminates the Executive’s employment
with the Company under Section 6.2(a) above, and
(iii) the Executive ceases, at any time prior to 5
th anniversary of the Effective Date, to qualify
for disability insurance payments under the long-term disability
insurance provided by the Company under Section 3.5(b) hereof,
then the Company shall, commencing on the 1
st calendar day of the month immediately following
the date on which the Executive no longer qualifies for disability
insurance payments, make monthly payments to the Executive to
replace his payments under the disability insurance (each, a
“Replacement Payment”). Each Replacement Payment shall
in an amount sufficient to put the Executive in the same after-tax
position (after taking into account applicable Federal, state,
local or other income taxes) that he would have been in if he had
continued to received monthly disability insurance payments. The
Company’s obligation to make monthly Replacement Payments
shall continue for the lesser of (X) twenty-four
(24) months, or (Y) the number of months then remaining prior
to the 5 th
anniversary of the Effective
Date.
6.3 Termination
for Cause .
(a) The
Company may terminate the Executive’s employment immediately
for Cause for any of the following reasons: (i) an act or acts
of dishonesty or fraud by the Executive relating to the performance
of his services to the Company; (ii) a breach by the Executive
of his duties or responsibilities under this Agreement resulting in
significant demonstrable injury to the Company or any of its
subsidiaries; (iii) the Executive’s conviction of a
felony or any crime
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involving moral
turpitude; (iv) the Executive’s material failure (for
reasons other than death, illness, injury or Disability) to perform
his duties under this Agreement or insubordination (defined as
refusal to execute or carry out the lawful and ethical directions
from the Board or its duly appointed designees) where the Executive
has been given written notice of the acts or omissions constituting
such failure or insubordination and the Executive has failed to
cure such conduct, where susceptible to cure, within ten days
following such notice; or (v) a breach by the Executive of any
provision of any material policy of the Company or any of his
obligations under Section 14 of this Agreement.
(b) The
Company shall exercise its right to terminate the Executive’s
employment for Cause by giving the Executive written notice of
termination specifying in reasonable detail the circumstances
constituting such Cause. In the event of such termination of the
Executive’s employment for Cause, the Executive shall be
entitled to receive only (i) his base salary pursuant to
Section 3.1 earned through the date of such termination of
employment plus his base salary for the period of any vacation time
earned but not taken for the year of termination of employment,
such base salary to be paid in a lump sum no later than the next
payroll date following the Executive’s date of termination to
the extent not previously paid; (ii) any other compensation
and benefits to the extent actually earned by the Executive under
any other benefit or bonus plan or program of the Company as of the
date of such termination of employment, such compensation and
benefits to be paid at the normal time for payment of such
compensation and benefits to the extent not previously paid; and
(iii) any reimbursement amounts owing under Section 4
hereof.
7.
Termination of Employment by the Executive .
(a) Good
Reason . The Executive may terminate his employment for Good
Reason by giving the Company a written notice of termination at
least 30 days before the date of such termination (or such
lesser notice period as the Company may agree to) specifying in
reasonable detail the circumstances constituting such Good Reason.
In the event of the Executive’s termination of his employment
for Good Reason, the Executive shall be entitled to receive the
Severance Benefits described in Section 9 of this Agreement.
For purposes of this Agreement, “Good Reason” shall
mean, without the Executive’s written consent: (i) a
material negative change in the scope of the authority, functions,
duties or responsibilities of Executive’s employment from
that which is contemplated by this Agreement; provided that a
change in scope solely as a result of the Company no longer being a
public company or becoming a subsidiary of another corporation
shall not constitute Good Reason; (ii) any reduction in the
Executive’s base salary under Section 3.1 hereof;
(iii) the Company materially changing the geographic location
in which the Executive must perform services from the Portland,
Maine metropolitan area; or (iv) any material breach by the
Company of any provision of this Agreement without the Executive
having committed any material breach of the Executive’s
obligations hereunder (including Section 14 hereof), in each
case of (i), (ii), (iii) or (iv), which breach is not cured by the
Company within thirty (30) days following written notice
thereof to the Company of such breach. If an event constituting a
ground for termination of employment for Good Reason occurs, and
the Executive fails to give notice of termination within sixty
(60) days after the occurrence of such event, the Executive
shall be deemed to have waived his right to terminate employment
for Good Reason in connection with such event (but not for any
other event for which the sixty (60) day period has not
expired). In addition, prospective changes to employee
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benefits for
future employment made on an across-the-board basis to all
similarly situated executives of the Company and its subsidiaries
shall not be considered Good Reason.
(b)
Other . The Executive may terminate his employment at any
time and for any reason, other than pursuant to subsection
(a) above, by giving the Company a written notice of
termination to that effect at least sixty (60) days before the
date of termination (or such lesser notice period as the Company
may agree to); provided , however , that the Company
following receipt of such notice from the Executive may elect to
have the Executive’s employment terminate immediately
following its receipt of such notice. In the event of the
Executive’s termination of his employment pursuant to this
subsection (b), the Executive shall be entitled to receive only:
(i) his base salary pursuant to Section 3.1 earned
through the date of such termination of employment plus his base
salary for the period of vacation time earned but not taken for the
year of termination of employment, such base salary to be paid in a
lump sum no later than the next payroll date following the
Executive’s date of termination to the extent not previously
paid; (ii) any other compensation and benefits to the extent
actually earned by the Executive under any other benefit or bonus
plan or program of the Company as of the date of such termination
of employment, such compensation and benefits to be paid at the
normal time for payment of such compensation and benefits to the
extent not previously paid; and (iii) any reimbursement
amounts owing under Section 4 hereof.
8.
Termination of Employment By Death .
(a) In the
event of the death of the Executive during the course of his
employment hereunder, the Executive’s estate (or other person
or entity having such entitlement pursuant to the terms of the
applicable plan or program) shall be entitled to receive:
(i) the Executive’s base salary pursuant to
Section 3.1 hereof earned through the date of the
Executive’s death plus the Executive’s base salary for
the period of vacation time earned but not taken for the year of
the Executive’s death, such base salary to be paid in a lump
sum no later than the next payroll date following the
Executive’s date of termination to the extent not previously
paid; (ii) any other compensation and benefits to the extent
actually earned by the Executive under any other benefit plan or
program of the Company as of the date of such termination of
employment, such compensation and benefits to be paid at the normal
time for payment of such compensation and benefits to the extent
not previously paid; and (iii) any reimbursement amounts owing
under Section 4 hereof.
(b) In
addition, in the event of such death, the Executive’s
beneficiaries shall receive the insurance benefits owed to them
under the term life insurance provided by the Company under Section
3.5(c) hereof and any other benefits owed to them under the
Company’s employee benefit plans.
9. Severance
Benefits Upon Termination Without Cause or For Good Reason . If
at any time prior to the end of the Term of this Agreement, the
Executive’s employment hereunder shall terminate because of
termination by the Company pursuant to Section 6.1, or because
of termination by the Executive for Good Reason pursuant to
Section 7(a), then the Executive shall be entitled to the
following:
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(a) The
Company shall pay to the Executive his base salary pursuant to
Section 3.1 hereof earned through the date of such termination
of employment in a lump sum no later than the next payroll date
following the Executive’s date of termination to the extent
not previously paid, and any other compensation and benefits to the
extent actually earned by the Executive under any benefit or bonus
plan or program of the Company as of the date of such termination
of employment, any such compensation and benefits to be paid at the
normal time for payment of such compensation and benefits to the
extent not previously paid.
(b) The
Company shall pay the Executive any reimbursement amounts owing
under Section 4 hereof.
(c) The
Company shall pay to the Executive a severance benefit (the
“Severance Benefit”). The Severance Benefit shall equal
the amount of base salary that the Executive would have received if
he remained employed for the balance of the Term, based upon his
then-current base salary without further increase. However, in no
event shall the Severance Benefit by less than the amount of base
salary that the Executive would have received if he remained
employed for twenty-four (24) months, based upon his
then-current salary without further increase. The amount of the
Severance Benefit as so determined shall be divided into
twenty-four (24) equal installments. Payment of such
installments shall be made as follows:
(i) payment shall commence on the first
(1 st
) date of the seventh (7
th ) month following the Executive’s
Separation from Service. The amount of the first payment shall
equal the first seven (7) such installments.
(ii) subsequent payments shall be made on
the first day of each succeeding month for the balance of the
twenty-four (24) month period.
(d) The
Company’s obligation to provide the severance benefits set
forth in Sections 9(c) upon the Executive’s termination of
employment without Cause or for Good Reason, shall be subject to
(i) the Executive’s compliance with the provisions of
Section 14 hereof; (ii) delivery to the Company of the
Executive’s resignation from all officer, directorships and
fiduciary positions with the Company, its subsidiaries and employee
benefit plans; and (iii) the Executive’s execution
without revocation of a valid Termination, Voluntary Release and
Waiver of Rights Agreement, in substantially the form attached to
this Agreement as Exhibit A (the
“Release”).
10. Golden
Parachute Excise Tax .
(a) In the
event that any payment or benefit received or to be received by the
Executiv
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