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As filed with the Securities and Exchange Commission on October 18, 1999
SEC File No. 33-__________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PINNACLE OIL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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Nevada 95-3797439
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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Suite 750 Phoenix Place, 840-7th Avenue, S.W., Calgary, Alberta, Canada T2P 3G2
(Address of Principal Executive Office) (Zip Code)
Pinnacle Oil International, Inc. Directors' Options
1997 Pinnacle Oil International, Inc. Stock Plan
1999 Pinnacle Oil International, Inc. Executive Option Plan
(Full Title of the Plan(s))
Daniel C. Topolinsky
Suite 750 Phoenix Place, 840-7th Avenue, S.W.,
Calgary, Alberta, Canada T2P 3G2
(403) 264-7020
(Name and address and telephone number, including area code,
of agent for service)
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following line: [_]
Calculation of Registration Fee
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Proposed maximum Proposed maximum Amount of
Title of securities Amount to be offering price per aggregate offering registration
to be registered registered share price fee
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Common stock, par value $0.001............. 90,000 (1) $ 5.25 (3) $ 472,500 $ 131.36
Common stock, par value $0.001............. 70,000 (1) 8.25 (3) 577,500 160.55
Common stock, par value $0.001............. 25,000 (1) 8.26 (3) 206,500 57.41
Common stock, par value $0.001............. 45,000 (1) 8.31 (3) 373,950 103.96
Common stock, par value $0.001............. 100,000 (1) 13.63 (3) 1,362,500 378.78
Common stock, par value $0.001............. 1,016,670 (1) 14.00 (3) 14,233,380 3,956.88
Common stock, par value $0.001............. 20,000 (1) 14.06 (3) 281,200 78.17
Common stock, par value $0.001............. 33,350 (1) 15.00 (3) 499,950 138.99
Common stock, par value $0.001............. 20,000 (1) 17.00 (3) 340,000 94.52
Common stock, par value $0.001............. 520,000 (2) 14.5625 (4) 7,410,000 2,105.16
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(1) Represents shares issuable upon the exercise of options granted under
various employee stock plans. Pursuant to Rule 416(a), also covers
additional securities that may be offered as a result of stock splits,
stock dividends or similar transactions relating to these shares.
(2) Represents shares issuable upon the exercise of options or stock grants
prospectively awardable under the registrant's 1997 Pinnacle Oil
International, Inc. Stock Plan. Pursuant to Rule 416(a), also covers
additional securities that may be offered as a result of stock splits,
stock dividends or similar transactions relating to these shares.
(3) Estimated pursuant to Rule 457(h)(1) solely for the purpose of computing
the registration fee on the basis of the price at which the options may be
exercised.
(4) Estimated pursuant to Rule 457(h)(1) and Rule 457(c) solely for the purpose
of computing the registration fee on the basis of the average of the bid
and asked prices of the registrant's common stock on October 14, 1999, as
reported on the NASD Electronic Bulletin Board.
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EXPLANATORY NOTE
We have prepared this registration statement in accordance with the requirements
of Form S-8 under the Securities Act of 1933, as amended (the "Securities Act"),
to register 1,940,000 shares of our common stock, par value $0.001 per share,
issuable our eligible employees, directors, consultants and advisors under
certain of our employee benefit plans (collectively, the "Plans"), as follows:
1. 135,000 shares of our common stock (including additional shares that may be
reissued or offered as a result of stock splits, stock dividends or similar
transactions relating to these shares) which we have reserved for issuance
upon exercise of free-standing written stock options previously granted to
certain of our directors (the "Directors' Options");
2. 285,000 shares of our common stock (including additional shares that may be
reissued or offered as a result of stock splits, stock dividends or similar
transactions relating to these shares) which we have reserved for issuance
upon exercise of written stock options previously granted to certain of our
employees under the 1997 Pinnacle Oil International, Inc. Stock Plan (the
"1997 Stock Plan");
3. 520,000 shares of our common stock (including additional shares that may be
reissued or offered as a result of cancellations of grants, stock splits,
stock dividends or similar transactions relating to these shares) which we
have reserved for issuance with respect to written stock options or stock
awards that we may prospectively grant to certain of our employees,
directors, consultants and advisors under the 1997 Stock Plan; and
4. 1,000,000 shares of our common stock (including additional shares that may
be reissued or offered as a result of stock splits, stock dividends or
similar transactions relating to these shares) which we have reserved for
issuance upon exercise of written options previously granted to certain of
our executive officers under the 1997 Pinnacle Oil International, Inc.
Executive Stock Option Plan (the "1999 Executive Option Plan").
REOFFER PROSPECTUS
Certain of the options described in paragraphs 1, 2 and 4 of the previous
section of this registration statement captioned "Explanatory Note" have been
granted to certain of our executive officers, directors and stockholders who are
deemed to be our "affiliates" (as such term is defined in Section 405 of the
Securities Act). The 1,205,000 shares of our common stock which we have
reserved for issuance to these affiliates upon their exercise of the noted
options will therefore, when issued, constitute "control securities" (defined as
securities acquired under a Securities Act registration statement held by
affiliates of the registrant). The following Reoffer Prospectus, which relates
to the reoffer and resale of the noted shares of common stock by the noted
affiliates, is being filed under cover of this Form S-8 pursuant to Note C of
the Instructions to Form S-8. This Reoffer Prospectus has been prepared in
accordance with Part I of Form S-3 under the Securities Act. This Reoffer
Prospectus may be utilized by the noted affiliates for the reoffer and resale of
up to 1,205,000 shares of our common stock acquired by the noted affiliates
through the exercise of the noted options.
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[LOGO OF PINNACLE OIL INTERNATIONAL, INC.] Reoffer Prospectus
1,205,000 Shares of Common Stock
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This prospectus relates to the public offer and sale by certain of our executive
officers, directors and stockholders (our "Selling Stockholders") of up to
1,205,000 shares of our common stock, par value $0.001, which they may acquire
upon exercise of stock options granted to them under various employee benefit
plans.
The Selling Stockholders may offer to sell the common stock covered by this
prospectus from time to time, in one or more transactions, at prices and upon
terms then obtainable on the NASD OTC Bulletin Board or any other public market
upon which the common stock may be traded at the time of such sales, in
negotiated transactions, in a combination of such methods of sale or otherwise.
Our Company will not receive any of the proceeds from these sales, although we
will receive any proceeds payable to exercise the underlying options. All
expenses of registration incurred in connection with this offering are being
borne by our Company, while our Selling Stockholders will bear all brokerage
commissions and other expenses incurred in connection with their sale of the
common stock covered by this prospectus.
Our common stock is quoted on the OTC Bulletin Board under the symbol "PSFD".
The closing price of our common stock on the OTC Bulletin Board as of October
14, 1999 as quoted by the NASD was $14.62 1/2 per share.
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An investment in the common stock which may be offered for sale under this
prospectus involves a high degree of risk. See "Risk Factors"
beginning on page 3 of this prospectus.
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Neither the United States Securities and Exchange Commission nor any state or
provincial securities administrator, including the Alberta Securities
Commission, has approved or disapproved of the common stock which may be offered
for sale under this prospectus, or determined that this prospectus is complete
or accurate. It's illegal for anyone to tell you otherwise.
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The Selling Stockholders are not allowed to sell the common stock offered by
this prospectus until the registration statement containing this prospectus that
we have filed with the Securities and Exchange Commission is declared effective
by the Securities and Exchange Commission. This prospectus is not an offer to
sell our common stock--and doesn't solicit offers to buy--in any state or
province where this offer or sale is not otherwise permitted.
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October 18, 1999
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Table Of Contents
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Prospectus Summary.......................................................... 1
Risk Factors................................................................ 3
Matters Generally Relating To Our Company And Our Business............... 3
Matters Relating To Our Common Stock..................................... 9
Special Note Regarding Forward-Looking Statements...........................11
Use of Proceeds.............................................................11
Determination Of Offering Price.............................................12
Dilution....................................................................12
Selling Stockholders........................................................12
Plan of Distribution........................................................14
Description Of Common Stock.................................................15
General..................................................................15
Common Stock.............................................................15
Interests Of Named Experts And Counsel......................................16
Where You Can Find More Information.........................................17
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Prospectus Summary
This summary highlights important information about our business and the offer
and sale of our common stock under this prospectus. Because it is a summary, it
is not complete and may not contain all of the information that is important to
you. You should read the entire prospectus carefully, including the risk
factors and all documents incorporated by reference into this prospectus.
All references to dollars in this prospectus refer to United States
dollars unless specified otherwise.
Our Company
Pinnacle Oil International, Inc., together with its subsidiaries, Pinnacle Oil
Inc. and Pinnacle Oil Canada, Inc., is a remote-sensing technology company
engaged in the business of wide-area hydrocarbon (oil and natural gas)
reconnaissance exploration. Our common stock is quoted on the OTC Bulletin
Board under the symbol "PSFD".
Our principal executive offices are located at Suite 750, Phoenix Place, 840-7th
Avenue S.W., Calgary, Alberta, Canada T2P 3G2, and our telephone number is (403)
264-7020.
Our Business
Our Company uses Stress Field Detector or "SFD" technology to survey or
reconnoiter large exploration areas from our survey aircraft at speeds in excess
of 150 mph to identify and "high-grade" potential SFD Leads for further
evaluation and drilling by our strategic partners. The SFD is a recently
developed technology which we adapted for airborne survey operations and field
tested for independent geologists and our strategic partners in 1996 and 1997,
and commenced SFD survey activities on a full commercial basis for its strategic
partners in early 1999. The SFD captures non-electromagnetic energy patterns
(which we refer to as "stress fields") which we believe result from subsurface
mechanical stress in rocks and subsurface fluid pressures. We process and
interpret the waveforms associated with these energy patterns through several
different modes of operation and analysis wherein we use the SFD as both an
inferential detection tool to identify geologic structures and features and
porosity levels from which the presence of hydrocarbons may be deduced, as well
as a direct detection tool which identifies the actual presence of oil, gas and
water and the relative amount of these accumulations. The SFD affords our
Company with the relatively inexpensive ability to obtain near real-time
analysis and interpretation of potential hydrocarbon accumulations in a matter
of days or weeks, as compared to months, and in some cases years, in the case of
the seismic methods currently employed by the oil and gas exploration industry
for wide area exploration or reconnaissance. These cost and time advantages
will ultimately enable our strategic partners to effectuate potentially
significant reductions in their "finding costs," i.e., the cost of wide-area
seismic, the cost to acquire land for exploration, and the cost to drill and
complete exploratory wells.
Proposed Sales Of Common Stock by Selling Stockholders
The Selling Stockholders may offer to sell the common stock covered by this
prospectus from time to time, in one or more transactions on the OTC Bulletin
Board (or any other public market upon which our common stock may be traded at
the time of such sales) at prices and at terms then prevailing or at prices
related to the then current market price or in negotiated transactions. The
Selling Stockholders have indicated that the shares offered by this prospectus
may be sold from time to time by them or by their pledgees, donees, transferees
or other successors in interest, although it should be noted that none of the
Selling Stockholders have any present intent or specific plans to sell these
shares or offer them for sale,
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and we cannot give you any assurance that any or all of these shares will be
sold by the Selling Stockholders.
Our Company will not receive any of the proceeds from any of these sales,
however, all shares of our common stock which may be sold under this prospectus
are issuable upon the exercise of issued and outstanding options granted by our
Company to the Selling Stockholders at various exercise prices ranging between
$5.25 and $17.00. If all of these options are exercised in full, we will
receive proceeds of $15,457,280. We will pay all expenses incurred to prepare
and file this prospectus and the registration statement on Form S-8 of which it
is a part, including registration fees and printing, legal and accounting fees,
from our general funds. Our Selling Stockholders will bear all brokerage
commissions and other expenses which they may incur in connection with their
offer and sale of the common stock covered by this prospectus.
Our common stock is quoted on the OTC Bulletin Board under the symbol "PSFD".
The closing price of our common stock on the OTC Bulletin Board as of October
14, 1999 as quoted by the NASD was $14.62 1/2 per share.
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Risk Factors
You should consider our common stock to be an investment that involves a high
degree of risk. In order to attain an appreciation for these risks, you should
read this prospectus in its entirety and consider all of the information and
advisements contained in this prospectus, including the following risk factors.
Any of the risk factors described below or elsewhere in this prospectus could
materially adversely affect our business, operating results and financial
condition, and could result in a complete loss of any value in our common stock.
Although we have attempted to provide a comprehensive list of risks, there may
be other risks and uncertainties that may also materially adversely affect our
business and financial condition that we have not yet identified or that we
currently think are immaterial.
You should rely only on the information contained in this prospectus to evaluate
our business and prospects and the value of our common stock. We have not
authorized anyone to provide you with information different from that contained
in this prospectus.
Matters Generally Relating To Our Company And Our Business
We Are A Developmental Stage Company With No Revenues; We Expect To Incur
Continuing Operating Losses For The Near-Future
We are a developmental stage company since no revenue-generating SFD Prospects
have been drilled to date, and we do not anticipate that we will receive any
meaningful revenues until the end of 1999 at the earliest should any of the SFD
Prospects which our strategic partners plan to drill later this year be
determined to contain commercial quantities of hydrocarbons based upon these
drilling results. We have incurred operating losses since our inception as a
result of our lack of revenues, and we anticipate that we will continue to incur
substantial operating losses for the near-future due to our significant monthly
operating and research & development costs.
While our joint-venture partners have an inventory of thirty-nine SFD Prospects
which they have accepted for potential exploratory drilling, we do not
anticipate that our strategic partners will drill more than one of these SFD
Prospects until the fourth quarter of 1999 at the earliest, and we also do not
anticipate that we will receive any meaningful revenues until the end of 1999 at
the earliest should any of these prospects be determined to contain commercial
quantities of hydrocarbons based upon these drilling results. We cannot give
you any assurance that our strategic partners will drill any of these SFD
Prospects at all or by projected drilling dates due to plethora of factors that
may affect the drilling process, including the perceived economics of drilling
at any time, the ability of the strategic partner to obtain drilling rights
(where necessary) on favorable terms or at all, and the ability of the strategic
partner to timely schedule a drilling rig and other drilling services.
Moreover, we cannot give you any assurance that any SFD Prospect that is drilled
will ultimately produce commercially viable quantities of oil or gas. See "Risk
Factors--Risks Relating to the Company and its Business," generally, and "--
Reliance on Joint Venture Partners--Non-Operator Status" and "--Risk of
Exploratory Drilling Activities" particularly.
We Have A Limited Operating History Which Makes It Difficult, If Not Impossible,
To Predict Future Operating Results
We have a limited operating history upon which any evaluation of our long-term
prospects might be based. We did not commence our business plan for the
exploitation of our SFD technology until December of 1995. Our ability to
generate revenues and profits will depend primarily upon the successful
implementation of our business plan, which is dependent upon one or more of our
strategic successfully drilling and producing commercially viable quantities of
oil or natural gas from SFD Prospects we identify.
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We are subject to the risks inherent in a new business enterprise, as well as
the more general risks inherent to the operation of an established business.
Our prospects must be considered in light of the risks, expenses and
difficulties encountered by all companies engaged in the extremely volatile and
competitive oil and gas markets. Any future success we might achieve will depend
upon many factors, including factors which will be beyond our control or which
cannot be predicted at this time. These factors may include:
. changes in hydrocarbon and exploration technologies;
. price and product competition;
. developments and changes in the international oil and gas market;
. changes in our strategy and business plan;
. changes in expenses;
. the timing of research and development expenditures;
. the level of our international revenues;
. fluctuations in foreign exchange rates;
. general economic conditions, both in the United States and Canada; and
. economic and regulatory conditions specific to the areas in which we
compete.
To address these risks we must, among other things, continue to respond to
competitive developments; attract, retain and motivate qualified personnel;
implement and successfully execute our business plan; obtain additional joint
venture partners; negotiate additional working interests and participations; and
upgrade and perfect our SFD technology. We cannot give you any assurance that
we will successfully address these risks, or that we will be able to achieve or
sustain profitable operations. Our limited operating history make it difficult,
if not impossible, to predict future operating results.
Uncertain Discovery Of Viable Commercial Prospects
Our future success is dependent upon our ability, through utilization of our SFD
technology, to locate commercially viable hydrocarbon accumulations for
development by our strategic partners. Based on our business plan, we will be
dependent on both (1) the efficacy of our SFD technology in locating SFD
Prospects; and (2) the cooperation and capital of our strategic partners in
exploiting these prospects. Although the results of our SFD technology as a
geologic structural identification tool have been satisfactorily tested by our
strategic partners, we cannot give you any assurances that our SFD technology
will be able to consistently locate hydrocarbons or oil and gas prospects, or
that these prospects will be commercially exploitable. We also cannot give you
any assurances that we will be able to discover commercial quantities of oil and
gas, or that our strategic partners will successfully acquire and drill
properties at low finding costs.
Uncertain Market Acceptance Of The SFD Survey System And Strategic Partner
Participation
There is limited market acceptance for our SFD technology, and it must compete
with established geological and geophysical technologies which have already
achieved market acceptance. As is typical in the case of any new technology,
demand and market acceptance for our SFD technology is subject to a high level
of uncertainty and risk. Because the market for our exploration services is new
and evolving, it is difficult to predict the future growth rate, and the size of
the potential market. We cannot give you any
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assurance that a market for our exploration services will develop, or be
sustainable. If the market fails to develop, or if our exploration services do
not achieve or sustain market acceptance, our business, results of operations
and financial condition would be materially and adversely affected.
We Are Not An Non-Operator And We Must Rely Upon Our Strategic Partners
We are reliant upon our strategic partners for opportunities to participate in
exploration prospects, through gross overriding royalties from producing SFD
Prospects and, in certain cases, equity participation on a working interest
basis from producing SFD Prospects. We exclusively focus on exploration and the
review and identification of viable prospects through our SFD technology, and
rely upon our strategic partners to provide and complete all other project
operations and responsibilities, including land acquisition, drilling, marketing
and project administration. As a result, we have only a limited ability to
exercise control over the selection of prospects for development, drilling or
production operations, or the associated costs of such operations. The success
of each project will be dependent upon a number of factors which are outside our
control, or controlled by our strategic partners as the project operator, in
accordance with the applicable agreements between our Company and the strategic
partners. These factors include:
. the selection and approval of prospects for lease/acquisition and
exploratory drilling;
. obtaining favorable leases and required permitting for projects;
. the availability of capital resources of the strategic partner for land
acquisition and drilling expenditures;
. the timing of drilling activity, and the economic conditions at such
time, including then prevailing prices for oil and gas; and
. the timing and amount of distributions from the production.
Our reliance on our strategic partners, and our limited ability to directly
control project operations, costs and distributions, could have a material
adverse effect on the realization of return from our interest in projects, and
on our overall financial condition.
We Will Be Subject To The Risks Inherent In Exploratory Drilling Activities
Pursuant to our business plan, our revenues and cash flow will be principally
dependent upon the success of drilling and production from prospects in which we
participate through agreements with our strategic partners, in the form of a
gross overriding royalty or, in certain cases, a working interest or other
participation right. The success of these prospects will be determined by the
location, development and production of commercial quantities of hydrocarbons.
Exploratory drilling is subject to numerous risks, including the risk that no
commercially productive oil and gas reservoirs will be encountered. The cost to
our strategic partners to drill, complete and operate wells is often uncertain,
and drilling operations may be curtailed, delayed or canceled as a result of a
variety of factors including unexpected formation and drilling conditions,
pressure or other irregularities in formations, equipment failures or accidents,
as well as weather conditions, compliance with governmental requirements and
shortages or delays in the delivery of equipment. Our partners' inability to
successfully locate and drill wells that produce commercial quantities of oil
and gas would have a material adverse effect on our business, financial position
and results of operations.
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Our Financial Results Will Be Affected By Volatility In Oil And Natural Gas
Prices
Although our primary efforts are focused on locating commercially viable
prospects and obtaining gross overriding royalty and, in certain cases, working
interest participations, our ultimate profitability, cash flow and future growth
will be affected by changes in prevailing oil and gas prices. Oil and gas
prices have been subject to wide fluctuations in recent years in response to
relatively minor changes in the supply and demand for oil and natural gas, to
market uncertainty and a variety of additional factors that are beyond our
control, including economic, political and regulatory developments, and
competition from other sources of energy. It is impossible to predict future
oil and natural gas price movements with any certainty. We do not currently
intend to engage in hedging activities. As a result, we may be more adversely
affected by fluctuations in oil and gas prices than other industry participants
that do engage in such activities. We cannot give you any assurances as to the
future level of activity in the oil and gas exploration and development
industry, or as to the future demand for our SFD technology. Any extended or
substantial decline in oil and gas prices would have a material adverse effect
on (1) our ability to negotiate favorable joint ventures with viable industry
participants; (2) the volume of oil and gas that could be economically produced
by the joint ventures in which we participate; (3) our access to capital; and
(4) our financial position and results of operations. See Part II, Item 3,
captioned "Quantitative And Qualitative Disclosures About Market Risk."
We Operate In A Highly Competitive Industry
We compete directly with independent, technology-driven exploration and service
companies, and indirectly (through our strategic partnerships) with major and
independent oil and gas companies in our exploration for and development of
commercial oil and gas properties. We will experience competition from numerous
hydrocarbon exploration competitors offering a wide variety of geological and
geophysical services. Many of these competitors have substantially greater
financial, technical, sales, marketing and other resources than we do, any may
be able to devote greater resources to the development, promotion and sales of
their services than our Company. We cannot give you any assurance that our
competitors will not develop exploration services that are superior to our SFD
technology, or that these technologies will not achieve greater market
acceptance than our SFD technology. Increased competition could impair our
ability to attract viable industry participants, and to negotiate favorable
participations and joint ventures with such parties, which could materially and
adversely affect our business, operating results and financial condition.
The oil and gas industry is highly competitive. Many companies and individuals
are engaged in the business of acquiring interests in and developing onshore oil
and gas properties in the United States and Canada, and the industry is not
dominated by any single competitor or a small number of competitors. Our
strategic partners will compete with numerous industry participants for the
acquisition of land and rights to prospects, and for the equipment and labor
required to operate and develop such prospects. Many of these competitors have
financial, technical and other resources substantially in excess of those
available to us. These competitive disadvantages could adversely affect our
ability to participate in projects with favorable rates of return.
Our Success Will Be Dependent Upon Our Ability To Maintain Our Technological
Advantages
The oil and gas industry is characterized by rapid technological advancements
and the frequent introduction of new products, services and technologies. As
new technologies develop, we may be placed at a competitive disadvantage, and
competitive pressures may force us to improve or complement our SFD technology,
or to implement additional technologies at substantial cost. In addition, other
oil and gas exploration companies may implement new technologies before us, and
these companies may be able to provide enhanced capabilities and superior
quality. We cannot give you any assurance that we will be
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able to respond to these competitive pressures and implement or enhance our SFD
technology on a timely basis, or at an acceptable cost. In such case, our
business, financial condition and results of operations could be materially
adversely affected.
Our Business Is Subject To The Usual Hazards Incident To The Drilling Of Oil And
Gas Wells
The exploration and development projects in which we will participate through
our strategic partners will be subject to the usual hazards incident to the
drilling of oil and gas wells, such as explosions, uncontrollable flows of oil,
gas or well fluids, fires, pollution and other environmental risks. These
hazards can cause personal injury and loss of life, severe damage to and
destruction of property and equipment, environmental damage and suspension of
operations. Our strategic partners or the project operator will, in accordance
with prevailing industry practice, maintain insurance against some, but not all,
of these risks. The occurrence of an uninsured casualty or claim would have an
adverse impact on the affected strategic partner, and indirectly on our
financial condition.
You Should Expect Variability In Our Operating Results Based Upon Various
Changing Industry Conditions
Our operating results may in the future fluctuate significantly depending upon a
number of factors including industry conditions, prices of oil and gas, rate of
drilling success, rates of production from completed wells and the timing of
capital expenditures. This variability could have a material adverse effect on
our business, financial condition and results of operations. In addition, any
failure or delay in the realization of expected cash flows from initial
operating activities could limit our future ability to continue exploration and
to participate in economically attractive projects.
Our Success Is Dependent Upon Key Personnel
Our success depends to a significant extent on the continued efforts of our
senior management team, which currently is composed of a small number of
individuals, including Mr. George Liszicasz, the inventor of our SFD technology
who is our Chief Executive Officer and who is responsible for the continuing
development of our SFD technology and the interpretation of SFD Data. While we
have entered into an employment agreement with our senior management team, Mr.
Liszicasz is not obligated, (and as a result of his relationships with Momentum
Resources Corporation may in the future be unable), to devote his entire
undivided time and effort to or for our benefit. We do not currently carry key
person life insurance on any of our executive officers, including Mr. Liszicasz.
The loss of Mr. Liszicasz's services would be extremely difficult to replace
since he is the inventor of, and has intimate knowledge of, the theoretical
basis of the SFD technology, and has also developed the methodologies used to
interpret SFD Data, and the loss of his services would likely have a material
adverse effect on our business, results of operations and financial condition.
While we are presently training personnel to operate our SFD technology and to
interpret SFD Data, we cannot give you any assurance that these personnel could
fully replace Mr. Liszicasz with respect to these functions, at least in the
short-term. Moreover, we do not know if we would be able to successfully
replicate the SFD technology in the event of the loss of Mr. Liszicasz. Our
ability to implement our growth strategies also depends upon our continuing
ability to attract and retain highly qualified geological, technical,
scientific, information management and administrative personnel. Competition
for these types of personnel is intense and we cannot give you any assurance
that we will be able to retain our key managerial, professional and/or technical
employees, or that we will be able to attract and retain additional highly
qualified managerial, professional and/or technical personnel in the future.
Our inability to attract and retain the necessary personnel could impede our
growth. (See "Management of Growth" below).
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Our Success Is Dependent Upon Our Ability To Manage Our Growth
Our success is dependent upon the rapid expansion of our business. This
expansion will place a significant strain on our financial, management and other
resources and will require us to:
. change, expand and improve our operating, managerial and financial
systems and controls;
. improve coordination between our various corporate functions; and
. hire additional geophysical, geological, professional, administrative
and managerial personnel.
We cannot give you any assurance that we will successfully hire or retain these
personnel to the extent required, or that we will be able to manage the
expansion of our operations effectively. If we are not able to effectively
manage our growth, or if our new personnel are not able to achieve anticipated
performance levels, our business, financial position and results of operations
will be materially and adversely affected.
Our Ability To Compete Is Dependent Upon Our Proprietary Rights And Access To
SFD Technology and SFD Data
We interpret and utilize SFD Data to identify commercially viable oil and
natural gas accumulations. We have the exclusive right to utilize SFD Data for
hydrocarbon exploration pursuant to a Restated Technology Agreement with
Momentum Resources Corporation. Momentum claims common law ownership of the SFD
Technology, however, Momentum has not obtained patent or copyright protection
for the SFD Technology. Based in part on an opinion of patent counsel, Momentum
and our Company each believe that the disclosure risks inherent in patent or
copyright registration far outweigh any legal protections which might be
afforded by such registration. In the absence of significant patent or
copyright protection, we may be vulnerable to competitors who attempt to imitate
our SFD technology, or to develop functionally similar technologies. Although
we believe that we have all rights necessary to market our services without
infringing upon any patents or copyrights held by others, we cannot give you any
assurance that conflicting patents or copyrights do not exist. We rely upon
trade secret protection and confidentiality and license agreements with our
employees, consultants, strategic partners and others to protect our proprietary
rights. Furthermore, we do believe, were Momentum were to apply for and receive
patent protection, that that patent protection would necessarily protect
Momentum or our Company from competition. Momentum and our Company therefore
anticipate continued reliance upon contractual rights and on common law
validating trade secrets. The steps taken by our Company and Momentum to
protect our respective rights may not be adequate to deter misappropriation, or
to preclude an independent third party from developing functionally similar
technology. We cannot give you any assurance that others will not independently
develop substantially equivalent proprietary information and techniques, or
otherwise gain access to Momentum's or our trade secrets, or otherwise disclose
aspects of the SFD technology, or that we will be able to meaningfully protect
our trade secrets. Litigation to enforce or defend intellectual property rights
is costly, and our Company and Momentum may not have sufficient resources to
pursue or defend litigation.
Our Business Is Subject To Significant Levels Of Governmental and Environmental
Regulation
The oil and natural gas industry is subject to extensive controls and
regulations imposed by various levels of the federal and state governments in
the United States and federal and provincial governments in Canada, including
environmental restrictions and prohibitions on releases or emissions of various
substances produced or utilized in association with certain oil and gas industry
operations. Public interest in the protection of the environment has increased
dramatically in recent years. Offshore drilling in certain areas has been
opposed by environmental groups and, in certain areas, has been restricted. We
believe that the trend of more expansive and stricter environmental legislation
and regulations will continue.
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<PAGE>
It is not expected that any of these government controls or regulations will
affect our operations in a manner materially different than they would affect
other oil and gas companies of similar size or scope of operations. All current
legislation is a matter of public record and we are not able to accurately
predict what additional legislation or amendments may be enacted. Governmental
regulations may be changed from time to time in response to economic or
political conditions. To the extent laws are enacted or other governmental
action is taken which prohibit or restrict onshore and offshore drilling or
impose environmental protection requirements that result in increased costs to
the oil and gas industry in general, our business and prospects could be
adversely affected.
Matters Relating To Our Common Stock
Limited Public Trading Market
There is only a limited public market for our common stock on the NASD OTC
Electronic Bulletin, and we cannot give you any assurance that a broader or more
active public trading market for our common stock will develop or be sustained.
We are under no obligation to take any action to improve the public market for
our securities including, without limitation, filing an application to list our
common stock on any stock exchange or any other over-the-counter market.
Our Stock Price Is Extremely Volatile
The market price for our common stock is extremely volatile and subject to
significant fluctuations in response to a variety of internal and external
factors, including the liquidity of the market for our common stock, variations
in our quarterly operating results, regulatory or other changes in the oil and
gas industry generally, announcements of our business developments or those of
our competitors, changes in operating costs and variations in general market
conditions. Because we are a development stage entity with a limited operating
history and no revenues or profits, the market price for our common stock will
be more volatile than that of a seasoned issuer. Changes in the market price of
our common stock may have no connection with our operating results or prospects.
No predictions or projections can be made as to what the prevailing market price
for our common stock will be at any time.
You May Become Subject To The Penny Stock Rules If Our Stock Price Declines To
Less Than $5
Since our common stock is not listed on a national stock exchange or quoted on
the Nasdaq Market, it will become subject, in the event the market price for
these shares declines to less than $5 per share, to a number of regulations
known as the "penny stock rules." The penny stock rules require a broker-dealer
to deliver a standardized risk disclosure document prepared by the Securities
and Exchange Commission, to provide the customer with additional information
including current bid and offer quotations for the penny stock, the compensation
of the broker-dealer and its salesperson in the transaction, monthly account
statements showing the market value of each penny stock held in the customer's
account, and to make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. To the extent these requirements may be
applicable they will reduce the level of trading activity in the secondary
market for our common stock and may severely and adversely affect the ability of
broker-dealers to sell our common stock.
You Should Not Expect To Receive Dividends In The Foreseeable Future
We have never paid any cash dividends on shares of our capital stock, and we do
not anticipate that we will pay any dividends in the foreseeable future. Our
current business plan is to retain any future earnings to finance the expansion
development of our business. Any future determination to pay cash dividends
will be at the discretion of our Board of Directors, and will be dependent upon
our financial condition, results of operations, capital requirements and other
factors as our Board may deem relevant at that time.
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<PAGE>
You Should Not Expect To Receive A Liquidation Distribution
If we were to liquidate or dissolve our Company, the holders of our common stock
would share ratably in our assets only after we satisfy any amounts we would owe
to our creditors and any amounts we would owe to our series "A" preferred
stockholders as a liquidation preference ($6,000,000). If our liquidation or
dissolution were attributable to our inability to profitably operate our
business, then it is likely that we would have material liabilities at the time
of liquidation or dissolution. Accordingly, we cannot give any assurance that
sufficient assets will remain available after the payment of our creditors and
preferred stockholders to enable any common stockholder to receive any
liquidation distribution with respect to our common stock.
Our Current Stockholders Will Continue To Control Our Company
Messrs. George Liszicasz and R. Dirk Stinson beneficially own over two-thirds of
our common stock and have the power, as a group, to elect a majority of our
Board of Directors. Our Board, in turn, has the power to appoint our officers
and to determine, in accordance with their fiduciary duties and the business
judgment rule, our direction, objectives and policies, such as:
. our business expansion or acquisition policies;
. whether we should raise additional capital through financing or equity
sources, and in what amounts;
. whether we should retain our cash reserves for future product
development, or distribute them as a dividend, and in what amounts;
. whether we should sell all or a substantial portion of our assets, or
should merge or consolidate with another corporation;
. transactions which may cause or prevent a change in control or the
winding up and dissolution of our Company.
An investment in our common stock will entail entrusting these and similar
decisions to our present management subject, of course, to their fiduciary
duties and the business judgment rule.
Conflicts Of Interest
Messrs. George Liszicasz and R. Dirk Stinson indirectly own and control both our
Company and Momentum Resources Corporation, which has granted us an exclusive
license to identifying oil and natural gas prospects using the SFD technology
while reserving the exclusive right to use the SFD technology for purposes other
than oil and natural gas exploration. Although Mr. Liszicasz has entered into
an employment agreement with us he is not obligated, and as a result of his
relationship with Momentum may in the future not be able, to devote his entire
undivided time and effort to or for our benefit. As a result of the foregoing
relationships, certain conflicts of interests between our Company and one or
more of Momentum and Messrs. Liszicasz and Stinson may directly or indirectly
arise, including the following:
. Mr. Liszicasz's potential inability to devote his undivided time and
attention to our affairs; and
. the proper exercise by Messrs. Liszicasz and/or Stinson of their
fiduciary duties on our behalf in connection with any matters
concerning Momentum such as, by way of example and not limitation,
disputes regarding the validity, scope or duration of the SFD
Technology License; the exploitation of corporate opportunities; rights
to proprietary property and information; maintenance
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<PAGE>
of confidential information as between entities; and potential
competition between the Company and Momentum.
While Messrs. Liszicasz and Stinson and our Company have executed certain
disclosures and consents relating to these conflicts, these disclosures and
consents will not remediate these conflicts, but will merely release Messrs.
Liszicasz and Stinson from liability as a result of the conflicts so long as
they use reasonable efforts to minimize the conflicts. In the event any of
these conflicts prove to be irreconcilable, Messrs. Liszicasz or Stinson may be
forced to resign their positions with our Company.
We Can Issue Additional Capital Stock At Any Time
We may issue up to 34,003,017 additional shares of our common stock without
further stockholder approval (after taking into consideration shares currently
issued and outstanding as of the date of this prospectus as well as shares
reserved for issuance under our currently outstanding convertible securities or
employee benefit plans, including the shares to be offered and sold under this
prospectus). Your proportionate ownership and voting rights as a common
stockholder could be adversely effected by the issuance of additional shares of
our common stock, including a substantial dilution in your net tangible book
value per share. We cannot give you any assurance that we will not issue
additional capital stock under circumstances we may deem appropriate at the
time.
Special Note Regarding Forward-Looking Statements
This prospectus and certain documents incorporated by reference into this
prospectus contain "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and such statements are subject to the safe harbors created by those
sections. These forward-looking statements generally reflect our current
expectations or beliefs, based on currently available information, regarding our
future results of operations, performance and achievements, or industry results.
You are urged to carefully review and consider the various disclosures made by
our Company in this prospectus that attempt to advise you of the risks and
factors that may affect our business and an investment in our securities.
In this prospectus, forward-looking statements are generally identified by the
words "anticipate," "expect," "predict," "project," "estimate," "plan,"
"intend," "believe," "may," "will" and other similar expressions and variations,
although these words are not the exclusive means of identifying those
statements. Generally speaking, any statements in this prospectus which refer
to characterizations of future events or circumstances constitute forward-
looking statements.
Any forward-looking statements contained in this prospectus are inherently
subject to known and unknown uncertainties, risks and other factors, which may
cause our actual results, performance or achievements to differ materially from
those expressed in, or implied by, those forward-looking statements. These
uncertainties, risks and other factors may include, but are not necessarily
limited to, those uncertainties and factors identified in this Risk Factors
section of the prospectus. You are cautioned not to put undue reliance on any
forward-looking statement.
Use of Proceeds
Our Company will not receive any of the proceeds from the sale of any common
stock under this prospectus, however, all shares of our common stock which may
be sold under this prospectus are issuable upon the exercise of issued and
outstanding options granted by our Company to the Selling
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<PAGE>
Stockholders at various exercise prices ranging between $5.25 and $17.00. If all
of these options are exercised in full, we will receive proceeds of $15,457,280.
We will pay all expenses incurred to prepare and file this prospectus and the
registration statement on Form S-8 of which it is a part, including registration
fees and printing, legal and accounting fees, from our general funds. Our
Selling Stockholders will bear all brokerage commissions and other expenses
which they may incur in connection with their offer and sale of the common stock
covered by this prospectus.
Because our Selling Stockholders will offer and sell the common stock covered by
this prospectus at various times at prices and at terms then prevailing or at
prices related to the then current market price or in negotiated transactions,
we have not included in this prospectus information about the amount of the
proceeds to be paid to our Selling Stockholders.
Determination Of Offering Price
Because our Selling Stockholders will offer and sell the common stock covered by
this prospectus at various times at prices and at terms then prevailing or at
prices related to the then current market price or in negotiated transactions,
we have not included in this prospectus information about the price to the
public for these shares.
Dilution
Because our Selling Stockholders will offer and sell the common stock covered by
this prospectus at various times at prices and at terms then prevailing or at
prices related to the then current market price or in negotiated transactions,
we have not included in this prospectus information about the dilution (if any)
to the public arising from these sales.
Selling Stockholders
The following table sets forth:
. The names of each of our Selling Stockholders, and
. The nature of any position, office or other material relationship
between each Selling Stockholder and our Company over the past three
years.
<TABLE>
<CAPTION>
Selling Stockholder Relationship
- ------------------------------------------- ------------------------------------------------------------------------------------
<S> <C>
George Liszisasz........................... Chief Executive Officer, Director and 5% Common Stockholder since January 1996
Daniel C. Topolinsky....................... President, Chief Operating Officer and Director since May 1, 1999
James R. Ehrets............................ Executive Vice President of Operations since May 1, 1999
John M. Woodbury, Jr....................... Chief Financial Officer, Secretary and General Counsel since July 8, 1998
R. Dirk Stinson............................ Director and 5% Stockholder since January 1996; President from January 1996 through
April 1999
Lorne W. Carson............................ Director since March 1998
</TABLE>
Each of our Selling Stockholders are considered to be an "affiliate" of our
Company within the meaning of Section 405 of the Securities Act by reason of
their status as executive officers and directors (as the case may be), as well
as their stockholdings in the case of Messrs. Liszicasz and Stinson. The common
stock which our Selling Stockholders may offer and sell under this prospectus,
which consist in the aggregate of
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1,205,000 shares, represent shares which the Selling Stockholders may acquire
through the exercise of stock options granted to them under various employee
benefit plans. In addition, under the registration statement of which this
prospectus is a part we have registered an additional number of shares of our
common stock that we may be required to issue to the Selling Stockholders as a
result of any stock split, stock dividend or similar transaction involving our
common stock. The foregoing shares, once acquired by the Selling Stockholders,
will be considered "control securities" (defined as securities acquired under a
Securities Act registration statement held by affiliates of our Company).
The Selling Stockholders have indicated that the shares offered by this
prospectus may be sold from time to time by them or by their pledgees, donees,
transferees or other successors in interest, although it should be noted that
none of the Selling Stockholders have any present intent or specific plans to
sell these shares or offer them for sale, and we cannot give you any assurance
that any or all of these shares will be sold by the Selling Stockholders. You
should also note that a significant portion of the options underlying the common
stock covered by this prospectus are held by our executive officers, and remain
subject to vesting conditions contingent upon the continued provision of
services as an employee of our Company over the next four to five years, and
therefore may not be acquired by these executive officers until such time as
these vesting conditions are satisfied.
The following table shows as of October ___, 1999:
. The name of each of the Selling Stockholders;
. The maximum number of shares of our common stock which each of the
Selling Stockholders may sell from time to time under this prospectus
(assuming the Selling Shareholders each earn, and acquire through
exercise, all shares which they are entitled to acquire pursuant to
their underlying options);
. The number of shares of our common stock beneficially owned by each of
the Selling Stockholders both before and after the offers and sales
contemplated by this prospectus (assuming the Selling Shareholders each
earn, acquire through exercise, and sell all shares which they are
entitled to acquire pursuant to their underlying options); and
. The percentage of our common stock which each of the Selling
Stockholders beneficially holds both before and after the offers and
sales contemplated by this prospectus.
The number of shares of our common stock deemed to be beneficially owned by each
of the Selling Stockholders has been calculated pursuant to Rule 13d-3(d)(1) of
the Exchange Act. This Rule provides that unissued shares underlying options,
warrants, rights or other conversion privileges that may be exercisable within
60 days will be deemed issued to the Selling Stockholder and outstanding for the
purpose of calculating the number and percentage owned by that person, but will
not be deemed issued and outstanding for the purpose of calculating the
percentage owned by each other person listed. The calculation of the percentage
of our common stock owned by the Selling Stockholders is based on 12,831,983
shares of common stock outstanding on our transfer records as of October ___,
1999. We believe that each individual named has sole investment and voting
power with respect to shares indicated as beneficially owned by them, subject to
community property laws, where applicable, except where otherwise noted.
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<TABLE>
<CAPTION>
Common Stock Percentage
----------------------------------------------------------- -------------------------
Shares Offered Shares Owned Shares Owned
For Sale Under Beneficially Beneficially After Before After
Selling Stockholder this Prospectus Before Offering Offering Offering Offering
- ------------------------------------ --------------- ---------------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
George Liszicasz.................... 45,000 (1) 5,245,032 (5) 5,200,032 40.7% 40.5%
Daniel C. Topolinsky................ 500,000 (2) 1,500 (6) 1,500 * *
James R. Ehrets..................... 500,000 (2) 5,000 (7) 5,000 * *
John M. Woodbury, Jr................ 70,000 (3) 20,409 (8) 10,409 * *
R. Dirk Stinson..................... 45,000 (1) 3,437,561 (9) 3,392,561 26.7% 26.4%
Lorne W. Carson..................... 45,000 (4) 34,500 (10) 4,500 * *
- ------------------
</TABLE>
* Less than 1%.
(1) Free-standing Directors' Options granted on May 20, 1997. These options
vested in equal increments of 15,000 shares each on May 20, 1997, May 20,
1998 and May 20, 1999, respectively, and each increment lapses (if
unexercised) five years after its date of vesting.
(2) Options granted on May 1, 1999 under the 1999 Pinnacle Oil International,
Inc. Executive Stock Option Plan (the "1999 Executive Option Plan"). These
options will become vested in annual increments of 85,000, 90,000, 95,000,
105,000 and 125,000 shares each on April 30, 2000 through April 30, 2004
based upon continued provision of services as an executive employee of our
Company. Each increment of vested options will lapse (if unexercised) five
years after date of vesting.
(3) Options granted on August 24, 1998 under the 1997 Pinnacle Oil
International, Inc. Stock Plan (the "1997 Stock Plan"). 10,000 of these
options became vested on July 8, 1999, and the balance of these options
will become vested in annual increments of 10,000, 16,667, 16,666 and
16,667 shares each on July 8, 2000 through July 8, 2003 based upon
continued provision of services as an executive employee of our Company.
Each increment of vested options will lapse (if unexercised) five years
after date of vesting.
(4) Free-standing Directors' Options granted on March 8, 1998. 30,000 of these
options became vested in equal increments of 15,000 shares each on March 8,
1998 and March 8, 1999, and the remaining balance will become vested on
March 8, 2000 upon nomination to our Company's Board of Directors. Each
increment of vested options will lapse (if unexercised) five years after
date of vesting.
(5) Includes 45,000 shares issuable upon exercise of vested Directors Options
(see footnote (1) above).
(6) Includes 1,500 shares held in spouse's retirement account. Does not
include 500,000 shares issuable upon exercise of options granted under the
1999 Executive Option Plan (see footnote (2) above).
(7) Includes: (1) 4,000 shares issuable upon conversion of series "A"
convertible preferred stock attributed to an indirect membership interest
in SFD Investment, LLC, and (2) 1,000 shares issuable upon exercise of
common stock purchase warrants attributed to an indirect membership
interest in SFD Investment, LLC. Does not include 500,000 shares issuable
upon exercise of options granted under the 1999 Executive Option Plan (see
footnote (2) above).
(8) Includes: (1) 10,025 shares held in 401(k) and IRA retirement accounts,
and (2) 384 shares held in spouse's IRA retirement account. Also includes
10,000 shares issuable upon exercise of vested options granted under the
1997 Stock Plan (see footnote(3) above).
(9) Includes: (1) 1,000 shares of common stock held by RRSP, and (2) 45,000
shares issuable upon exercise of vested Directors Options (see footnote (1)
above).
(10) Includes 30,000 shares issuable upon exercise of vested Directors Options
(see footnote (4) above).
Plan of Distribution
The offer and sale of our common stock under this prospectus by our Selling
Stockholders may be effected from time to time in one or more transactions on
the OTC Bulletin Board (or any other public market upon which our common stock
may be traded at the time of such sales) at prices and at terms then prevailing
or at prices related to the then current market price or in negotiated
transactions.
These shares may be sold by one or more of the following:
. A block trade in which the broker or dealer will attempt to sell shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction.
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<PAGE>
. Purchases by a broker or dealer as principal and resale by a broker or
dealer for its account using this prospectus.
. Ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
. In privately negotiated transactions not involving a broker or dealer.
In effecting sales, brokers or dealers engaged to sell the shares may arrange
for other brokers or dealers to participate. Brokers or dealers engaged to sell
the shares will receive compensation in the form of commissions or discounts in
amounts to be negotiated immediately prior to each sale. These brokers or
dealers and any other participating brokers or dealers may be deemed to be
underwriters within the meaning of the Securities Act in connection with these
sales. Our Company will receive no proceeds from any resales of the shares
offered by this prospectus, and we anticipate that the brokers or dealers, if
any, participating in the sales of the shares will receive the usual and
customary selling commissions.
Our Selling Stockholders are restricted, pursuant to Instruction C(2)(b) of Form
S-8, from selling a number of common shares under this prospectus within any
three-month period which exceeds that amount specified by Rule 144(e) of the
Exchange Act. This Rule stipulates that the maximum number of securities which
an affiliate may sell within any three-month period under Rule 144 cannot exceed
the greater of the following:
. 1% of the then outstanding shares of our common stock, and
. the average weekly reported trading volume of our common stock on the
public market during the four calendar weeks immediately preceding the
date on which notice of the sale under Rule 144 is filed with the
Securities and Exchange Commission.
To comply with the securities laws of some states and provinces, if applicable,
the shares will be sold in these states only through brokers or dealers. In
addition, the shares may not be sold in certain states and provinces unless they
have been registered or qualified for sale in these jurisdictions or an
exemption from registration or qualification is available and is complied with.
Description Of Common Stock
General
Our Company was incorporated as "Auric Mining Corporation" in the State of
Nevada, pursuant to Articles of Incorporation filed on September 27, 1994, and
amended in April of 1998. The authorized capital stock of our Company consists
of 50,000,000 shares of common stock, par value $0.001 per share, and 800,000
shares of series "A" preferred stock, which is convertible into our common
stock. At the close of business on October 14, 1999, there were outstanding
12,831,983 shares of our common stock and 800,000 shares of our series "A"
preferred stock. All of these shares are fully paid and nonassessable.
Common Stock
Each holder of our common stock is entitled to one vote for each share owned of
record on matters voted upon by stockholders. Under the Nevada Revised Statutes
Chapter 78 (the "Nevada Code") a majority vote is required for all action to be
taken by stockholders, except that, subject to certain limited exceptions, any
director may be removed from office by the vote of stockholders representing not
less than two-thirds of the voting power of our issued and outstanding common
stock. In the event of the liquidation, dissolution or winding-up of our
Company, the holders of our common stock are entitled to share equally and
ratably in the assets of our Company, if any, remaining after the payment of all
of our debts and
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<PAGE>
liabilities, and payment of the liquidation preference of any outstanding
preferred stock. Our common stock has no preemptive rights, no cumulative voting
rights and no redemption, sinking fund or conversion provisions.
Holders of our common stock are entitled to receive dividends if, as, and when
declared by our Board of Directors out of funds legally available therefor,
subject to the dividend and liquidation rights of any preferred stock that may
be issued, and subject to any dividend restrictions that may be contained in
future credit facilities. We are prohibited under Nevada law from paying any
dividend or making any other distribution (including redemptions or repurchases
of shares of our capital stock) if, after giving effect to that distribution,
our Company would not be able to pay its debts as they become due in the usual
course of business, or our total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if we were to be dissolved at
the time of distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution.
The Nevada Code also contains provisions restricting our ability to engage in
business combinations with an interested stockholder. Under the Nevada Code,
except under certain circumstances, business combinations with interested
stockholders are not permitted for a period of three years following the date
such stockholder becomes an interested stockholder. Generally, the Nevada Code
defines an interested stockholder as a person who is the beneficial owner,
directly or indirectly, of 10% of the outstanding shares of a Nevada
corporation. In addition, the Nevada Code generally disallows the exercise of
voting rights with respect to "control shares" of an "issuing corporation" held
by an "acquiring person," unless such voting rights are conferred by a majority
vote of the disinterested stockholders. "Control shares" are those outstanding
voting shares of an issuing corporation which an acquiring person, and those
persons acting in association with an acquiring person:
. Acquire or offer to acquire in the acquisition of a controlling
interest, and
. Acquire within 90 days immediately preceding the date when the acquiring
person became an acquiring person.
An "issuing corporation" is a corporation organized in Nevada which has two
hundred or more stockholders, at least one hundred of whom are stockholders of
record and residents of Nevada, and which does business in Nevada directly or
through an affiliated corporation. The Nevada Code also permits directors to
resist a change or potential change in control of the corporation if the
directors determine that the change or potential change is opposed to or not in
the best interest of the corporation. As a result, our Board of Directors may
have considerable discretion in considering and responding to unsolicited offers
to purchase a controlling interest in our Company.
Our common stock is traded on the NASD OTC Bulletin Board under the symbol
"PSFD." Our transfer agent and registrar is Jersey Transfer and Trust Co.
Interests Of Named Experts And Counsel
This prospectus and the registration statement of which it is a part were
prepared by our general counsel, John M. Woodbury, Jr. Mr. Woodbury is one of
our executive officers and a holder of less than 1% of our common stock, and is
also a Selling Stockholder under this prospectus with respect to 70,000 shares
of common stock he may acquire through the exercise of options to purchase
70,000 shares of our common stock.
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<PAGE>
Where You Can Find More Information
This prospectus is part of a registration statement on Form S-8 we have filed
with the Securities and Exchange Commission. This prospectus does not contain
all of the information set forth in the registration statement and the exhibits
and schedules filed therewith because certain parts are omitted from this
prospectus in accordance with the rules and regulations of the Securities and
Exchange Commission. You should refer to the registration statement and those
exhibits and schedules for further information regarding our Company and the
shares of common stock to be offered for sale under this prospectus. Please
also note that any statements or descriptions contained in this prospectus
relating to the contents of any contract or other document are not necessarily
complete, and those statements or descriptions are qualified in all respects to
the underlying contract or document in each instance where it is filed as an
exhibit to the registration statement.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different
information.
We are subject to the information and periodic reporting requirements of the
Exchange Act, and accordingly file reports, proxy statements, information
statements and other information with the Securities and Exchange Commission in
accordance with the Exchange Act. You may read and copy any document we file
with the Securities and Exchange Commission at its public reference rooms
located at the following locations:
. Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549,
. Seven World Trade Center, 13th Floor, New York, New York 10048, and
. Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information about the public reference rooms. You may also obtain copies of
these materials by mail at prescribed rates from the Public Reference Section of
the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. Our filings with the Securities and Exchange Commission also are
available to the public from the Securities and Exchange Commission's Web site
at http://www.sec.gov.
We will promptly furnish each person to whom this prospectus is delivered
without charge upon their written request copies of all the information that has
been incorporated by reference into this prospectus (other than exhibits to that
information, unless those exhibits are specifically incorporated by reference
into such information). Requests for these copies should be directed to:
Pinnacle Oil International, Inc.
840 7th Avenue S.W, Suite 750
Calgary, Alberta, Canada
T2P 3G2
(403) 264-7020
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PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEMS 1 AND 2. PLAN INFORMATION; REGISTRANT INFORMATION AND EMPLOYEE PLAN
ANNUAL INFORMATION
Pursuant to Rule 428(b)(1) under the Securities Act, we will distribute an
information statement containing the information specified in Part I of Form S-8
(an "Information Statement") to the holders of options we have previously
granted under the Plans, as well as to prospective recipients of awards under
the 1997 Stock Plan. This Information Statement and the documents we
incorporate by reference into this registration statement pursuant to Item 3 of
Part II below constitute a prospectus meeting the requirements of Section 10(a)
of the Securities Act pursuant to Rule 428(a)(1) under the Securities Act.
Although we have omitted this Information Statement as an exhibit to this
registration statement pursuant to the instructions to Part I of Form S-8, we
nevertheless incorporate it into this registration statement by reference.
I-1
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
We incorporate the following documents by reference into this registration
statement:
(1) Our Annual Report on Form 10-K filed for our fiscal year ended December 31,
1998, as filed with the Securities and Exchange Commission on March 31,
1999 pursuant to Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(2) Our Quarterly Report on Form 10-Q filed for our six-month interim period
ended June 30, 1999 as filed with the Securities and Exchange Commission on
August 16, 1999; and
(3) Our proxy statement on Form 14A for our annual meeting of stockholders held
on September 9, 1999, as filed with the Securities and Exchange Commission
on August 9, 1999.
All documents we may file with the Securities and Exchange Commission pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of
this registration statement and prior to the filing of a post-effective
amendment to this registration statement which indicates that all shares of
common stock offered under this registration statement have been sold, or which
deregisters all shares of common stock offered under this registration statement
then remaining unsold, shall be deemed to be incorporated by reference in the
registration statement and to be a part hereof from the date of filing of such
documents.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable--the common stock to be offered pursuant to this registration
statement is registered under Section 12(g) of the Exchange Act.
Item 5. Interests of Named Experts and Counsel
This registration statement was prepared by our in-house general counsel, John
M. Woodbury, Jr. Mr. Woodbury is one of our executive officers and a holder of
less than 1% of our common stock, and also holds options to purchase 70,000
shares of our common stock, which derivative shares are being registered under
this registration statement.
Item 6. Indemnification of Officers and Directors
Our Bylaws require our Company to indemnify our officers and directors to the
fullest extent permitted under applicable Nevada statutes and caselaw. In
accordance with these provisions and appropriate resolutions of our Board of
Directors, we have entered into an Indemnity Agreement with each of our officers
and directors. A summary of the circumstances in which such indemnification is
provided is set forth below.
1. We are obligated to indemnify each officer and director for all actions in
his official capacity, or in another capacity while holding office, except
for instances where a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a knowing violation of
the law.
2. We are further obligated to indemnify each officer and director against
expenses, including attorneys'
II-1
<PAGE>
fees, fines, settlements or judgments, which were actually and reasonably
incurred by him in connection with a threatened, pending or completed
action, suit or proceeding, other than one brought by or on the behalf of
our Company, if (i) he actually was or was threatened to be made a party by
reason of the fact that he is or was an officer or director; (ii) he acted
in good faith and in a manner he believed to be in, or not opposed to, the
best interests of our Company; and (iii) with respect to any criminal action
or proceeding, he had no reasonable cause to believe his conduct was
unlawful.
3. If the action or suit is brought by or on behalf of our Company, (i) the
officer or director to be indemnified must have acted in good faith and in a
manner he reasonably believed to be in or not opposed to our Company's best
interest; (ii) criminal penalties, judgments, and fines are not indemnified;
and (iii) no indemnification will be made with respect to any claim, issue
or matter as to which the officer or director shall have been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals, to be
liable to our Company; unless, and only to the extent that, a court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the officer or director is fairly and reasonably
entitled to indemnity for such expenses.
4. Notwithstanding the provisions of paragraphs 2 and 3, we have agreed to pay
expenses, including attorneys' fees, actually and reasonably incurred by an
officer or director in defense of any action, suit or proceeding covered
thereunder, to the extent he has been successful on the merits or otherwise
in defense of such action, suit or proceeding.
5. Any indemnification under paragraphs 2 and 3 above, unless ordered by a
court or advanced as provided in paragraph 6 below, may be made by our
Company only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances.
The determination must be made by: (i) the stockholders; (ii) our Board of
Directors by a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding; (iii) if a majority vote of a
quorum of directors who were not parties to the act, suit or proceeding so
orders, then by independent legal counsel in a written opinion; or (iv) if
such a quorum cannot be obtained, by independent legal counsel in a written
opinion.
6. We have agreed to pay to each officer or director the expenses of defending
a civil or criminal action, suit or proceeding as they are incurred, and in
advance of the final disposition of the action, suit or proceeding, upon
receipt of an undertaking by the officer or director to repay these amounts
if it is ultimately determined by a court of competent jurisdiction that he
is not entitled to be indemnified by our Company.
The foregoing description is qualified in its entirety by reference to our
Bylaws, Nevada law and the applicable Indemnity Agreements in the form included
as an exhibit to our registration statement on Form 10, as filed with the
Securities and Exchange Commission on June 29, 1998 (SEC File No. 0-24027), and
incorporated into this registration statement by reference.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
4.1 Form of Non-Qualified Stock Option Agreement for grants of options to
directors (Messrs. Liszicasz, Stinson and Carson) (1)
4.2 1997 Pinnacle Oil International, Inc. Stock Plan (1)
4.3 Amendment No. 1 to 1997 Pinnacle Oil International, Inc. Stock Plan
4.4 Form of Stock Option Certificate for grants to employees under the
1997 Pinnacle Oil
II-2
<PAGE>
International, Inc. Stock Plan
4.5 1999 Pinnacle Oil International, Inc. Executive Stock Option Plan
4.6 Form of Stock Option Certificate for grants to employees under the
1999 Pinnacle Oil International, Inc. Executive Stock Option Plan
4.7 Executive Employment Agreement dated May 1, 1999 with Mr. Daniel C.
Topolinsky
4.8 Executive Employment Agreement dated May 1, 1999 with Mr. James R.
Ehrets
5. Opinion of in-house U.S. legal counsel to the registrant (John M.
Woodbury, Jr., Esq.), regarding the legality of the securities
offered.
23.1 Consent of Independent Auditors (Deloitte & Touche LLP).
23.2 Consent of Independent Auditors (BDO Dunwoody LLP).
23.3 Consent of legal counsel (included in Exhibit 5).
24. Power of Attorney for Directors (included below under Signatures).
(1) Previously filed by our Company as an exhibit to registration
statement on Form 10 filed with the Securities and Exchange
Commission on June 29, 1998 (SEC File No. 0-24027)
(2) Previously filed by our Company as an exhibit to amendment no. 1
to registration statement on Form 10 filed with the Securities
and Exchange Commission on August 31, 1998
Item 9. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the
II-3
<PAGE>
securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel that matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
questions whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that is has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Calgary, Province of Alberta, Canada, on October 15,
1999.
PINNACLE OIL INTERNATIONAL, INC.
/s/ Daniel C. Topolinsky
-----------------------------------------------
Daniel C. Topolinsky,
President, Chief Operating Officer and Director
II-4
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Daniel C.
Topolinsky and John M. Woodbury, Jr., and each of them, as his or her true and
lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing necessary or
advisable to be done in or about the foregoing, as fully and to all intents and
purposes as the undersigned and each of them might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or each of
them, or their substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------------- ---------------------------------- ---------------
<S> <C> <C>
/s/ George Liszicasz Chief Executive Officer and October 15, 1999
- ---------------------------------------- Director (Chairman of the Board)
George Liszicasz
/s/ Daniel C. Topolinsky President, Chief Operating October 15, 1999
- ---------------------------------------- Officer and Director
Daniel C. Topolinsky
/s/ John M. Woodbury, Jr. Chief Financial Officer (principal October 15, 1999
- ---------------------------------------- accounting and financial officer)
John M. Woodbury, Jr. and Secretary
/s/ R. Dirk Stinson Director October 15, 1999
- ----------------------------------------
R. Dirk Stinson
/s/ Lorne W. Carson Director October 15, 1999
- ----------------------------------------
Lorne W. Carson
/s/ Jon E.M. Jacoby Director October 15, 1999
- ----------------------------------------
Jon E.M. Jacoby
/s/ K. Rick Turner Director October 15, 1999
- ----------------------------------------
K. Rick Turner
/s/ Dennis R. Hunter Director October 15, 1999
- ----------------------------------------
Dennis R. Hunter
</TABLE>
II-5
<PAGE>
Exhibit 4.3
AMENDMENT NO. 1
To
1997 PINNACLE OIL INTERNATIONAL, INC. STOCK PLAN
The 1997 Pinnacle Oil International, Inc. Stock Plan is hereby amended by the
Board of Directors of Pinnacle Oil International, Inc. pursuant to the authority
granted to it under section 19(d) of such Plan as follows:
1. The Definition of Consultant in section 1(l) of the Plan is hereby revised
------------
in its entirety to read as follows:
(l) "Consultant" shall mean any natural person who, in a capacity other
------------
than as an Employee or Director, provides bona fide services pursuant
to a contract in a consulting or advisory capacity to the Company
and/or to any Parent and/or to any Subsidiary other than any services
pursuant to a contract within the parameters set forth in section 1(o)
------------
relating to Eligible Persons.
2. The Definition of Eligible Person in section 1(o) of the Plan is hereby
------------
revised in its entirety to read as follows:
(o) "Eligible Person" shall mean any Person who, at the applicable time of
-----------------
the grant or award of an Award under the Plan, is an Employee, a
Director, and/or a Consultant who is a natural person. Notwithstanding
the foregoing ,
(i) no Award hereunder may be granted to any Person, even if otherwise
an Eligible Person, with respect to any circumstances which would
not be considered to be either a bonus or reward for services
provided, or compensation for goods or services rendered; and
(ii) no Award hereunder may be granted to any Consultant for any
services rendered wholly or partially in connection with the offer
and sale of securities in a capital-raising transaction or which
services directly or indirectly promote or maintain a market for
the Company's securities.
The interpretation of Consultant shall, in all cases, be made in reference
to Rule 701 promulgated under the Securities Act or, following such time as
the Company shall become a Reporting Company, as allowed under Form S-8
promulgated under the Securities Act.
<PAGE>
EXHIBIT 4.4
NO. 0__
- --------------------------------------------------------------------------------
STOCK OPTION CERTIFICATE
1997 Pinnacle Oil International, INC. STOCK PLAN
------------------------------------------------
[To be prepared by the Company and signed by the Recipient]
<TABLE>
<CAPTION>
=====================================================================================================================
<S> <C> <C>
Name of Recipient..........................
Capacity of Recipient...................... [_] Employee [_] Executive Officer
[_] Director [_] Consultant
Legal Address/Domicile of Recipient........
Citizenship of Recipient................... [_] United States [_] Canada
[_] Other:
-------------------------------------
Number of Option Shares....................
Option Price per Option Share..............
Classification of Option................... [_] Non-Qualified Option [_] Incentive Option
Vesting.................................... [_] Fully Vested
[_] Continuous Service Vesting (see sections 2 through 4 below)
---------- -
Continuous Services Vesting Date:
Option Expiration Date.....................
Option Effective Date......................
U.S. Federal Exemption To Be Relied
Upon at the Time of Exercise..............
Blue Sky Exemption Relied Upon.............
=====================================================================================================================
</TABLE>
The securities offered hereby have not been registered with, or approved or
disapproved by, the United States Securities and Exchange Commission or any
state, territorial or provincial securities regulatory agency, including the
Alberta Securities Commission, nor has the Securities and Exchange Commission or
any state, territorial or provincial securities regulatory agency, including the
Alberta Securities Commission, reviewed or passed upon or endorsed the merits of
the offering contemplated by this Stock Option Certificate or the accuracy or
adequacy of any offering materials, including the 1997 Pinnacle Oil
International, Inc. Stock Plan or the Plan Summary for such stock plan. Any
representation to the contrary is a criminal offense. These securities are
speculative and involve a high degree of risk and substantial and immediate
dilution. There is a limited public market for the sale of these securities by
the recipient. These securities may not be sold or transferred unless
registered, or the recipient provides the company an opinion of counsel
satisfactory to the Company, or its legal counsel, that such registration is not
required by reason of an exemption or otherwise. As a result, these securities
are suitable only for certain sophisticated and qualified investors who can bear
the financial risk of an investment in these securities for an indefinite period
of time.
================================================================================
<PAGE>
No. 0__
================================================================================
THIS STOCK OPTION CERTIFICATE is entered into between Pinnacle Oil
International, Inc., a Nevada corporation (the "Company"), whose principal
executive office is located at 840 7/th/ Avenue, Suite 750, Phoenix Place, S.W.,
Calgary, Alberta, Canada, T2P 3G2, and the Recipient identified on the first
page of this Stock Option Certificate (the "Recipient"), pursuant to that
certain 1997 Pinnacle Oil International, Inc. Stock Plan dated July 25, 1997, as
such Plan may be amended and/or restated from time to time (the "Plan").
Subject to the terms of this Stock Option Certificate, the Recipient's rights to
purchase the Option Shares are governed by the Plan, the terms of which are
incorporated herein by this reference. Defined terms in this Stock Option
Certificate shall have the same meaning as defined terms in the Plan.
1. GRANT OF OPTION
This Stock Option Certificate certifies that the Company has granted to the
Recipient, pursuant to the terms of the Plan, a stock option (the "Option")
to purchase, in whole or in part, the number of Option Shares designated on
the first page of this Stock Option Certificate (collectively and
severally, the "Option Shares"), representing shares of the common stock,
par value $0.001 (the "Common Stock") of the Company, at the exercise or
Option Price per Option Share designated on the first page of this Stock
Option Certificate (the "Option Price"), subject to the following terms and
conditions.
2. CONTINUOUS SERVICE VESTING
If the Option Shares are subject to vesting by reason of the Continuous
Service Vesting designation set forth on the first page of this Stock
Option Certificate, then, subject to section 5(e) of the Plan, the Option
------------
Shares are subject to vesting based upon continued performance of services
in the capacity set forth on the first page of this Stock Option
Certificate through the Continuous Service Vesting Date (as such date is
defined on the first page of this Stock Option Certificate).
The Recipient acknowledges and represents that he, she or it is familiar
with section 17 of the Plan, and agrees that the grant of this Option shall
----------
not be construed under any circumstances to: (1) confer a continued right
of employment or engagement to the Recipient to the Continuous Service
Vesting Date (if he, she or it is employed or engaged by the Company or its
affiliates), or (2) affect, restrict or interfere with in any way any right
the Company or its affiliates may have to terminate or otherwise discharge
the Recipient's employment and/or engagement at any time (including before
the Continuous Service Vesting Date), with or without cause, except to the
extent that the Recipient and the Company or its affiliates may have
otherwise expressly agreed in writing making specific reference to this
Option.
3. CONTINUOUS SERVICE VESTING -- ACCELERATION OF VESTING IN THE EVENT OF
TERMINATION OF RECIPIENT
If the Option Shares are subject to vesting by reason of the Continuous
Service Vesting designation set forth on the first page of this Stock
Option Certificate, then the prospective right to purchase unvested Option
--------
Shares shall immediately lapse if such right does not vest prior to
Termination Of Recipient.
4. TERM OF OPTION
The right to exercise the Options granted by this Stock Option Certificate
shall commence on the Option Effective Date designated on the first page of
this Stock Option Certificate, and shall expire and be null and void ab
initio and of no further force or effect to the extent not exercised by
5:00 p.m. M.S.T., on the Option Expiration Date designated on the first
page of this Stock Option Certificate (the "Option Expiration Date");
provided, however, if the Option Shares are subject to the Continuous
Service Vesting designation set forth on the first page of this Stock
Option Certificate, then, pursuant to section 5(e)(iii) of the Plan, in the
-----------------
event of Termination Of Recipient, the expiration date shall be accelerated
to two (2) years after the effective date of Termination Of Recipient (if
earlier than the Option Expiration Date).
-2-
<PAGE>
No. 0__
================================================================================
5. DELIVERIES; MANNER OF EXERCISE AND PAYMENT
This Option shall be exercised by delivery of the following to the
Secretary of the Company at the Company's principal executive offices: (i)
this Stock Option Certificate, duly signed by the Recipient; (ii) full
payment for the Option Shares to be purchased in (1) immediately available
funds (in U.S. dollars); (2) if then employed by the Company, shares of
Common Stock pursuant to section 5(f)(iii)(l) of the Plan; (3) if then
--------------------
employed by the Company, surrender or relinquishment of rights to acquire
Common Stock pursuant to section 5(f)(iii)(2) of the Plan; (4) if and to
--------------------
the extent consented to by the Board, a promissory note pursuant to section
-------
5(f)(iii)(3) of the Plan; and/or (5) if and to the extent consented to by
------------
the Board, other property constituting good and valuable consideration
pursuant to section 5(f)(iii)(4) of the Plan; and (iii) a Consent of Spouse
--------------------
(as such consent is defined in the Plan) from the spouse of the Recipient,
if any, duly signed by such spouse.
6. EXERICISE AND TRANSFER OF OPTION
Options may only be exercised by the original Recipient hereof, and may not
be Transferred by such Recipient, except upon and following the Death of a
Recipient (if a natural person), but only to the Recipient's Successors as
provided in sections 5(i)(ii) and 5(i)(iii) of the Plan. Any Transfer or
---------------- ---------
exercise of an Option so Transferred in violation of this Stock Option
Certificate shall be null and void ab initio and of no further force and
effect.
7. MISCELLANEOUS
(a) Preparation of Stock Option Certificate; Costs and Expenses. This
-----------------------------------------------------------
Stock Option Certificate was prepared by the Company solely on behalf
of the Company. Each party acknowledges that: (i) he, she or it had
the advice of, or sufficient opportunity to obtain the advice of,
legal counsel separate and independent of legal counsel for any other
party hereto; (ii) the terms of the transaction contemplated by this
Stock Option Certificate are fair and reasonable to such party; and
(iii) such party has voluntarily entered into the transaction
contemplated by this Stock Option Certificate without duress or
coercion. Each party further acknowledges such party was not
represented by the legal counsel of any other party hereto in
connection with the transaction contemplated by this Stock Option
Certificate, nor was such party under any belief or understanding that
such legal counsel was representing his, her or its interests. Except
as expressly set forth in this Stock Option Certificate, each party
shall pay all legal and other costs and expenses incurred or to be
incurred by such party in negotiating and preparing this Stock Option
Certificate; in performing due diligence or retaining professional
advisors; in performing any transactions contemplated by this Stock
Option Certificate; or in complying with such party's covenants,
agreements and conditions contained herein. Each party agrees that no
conflict, omission or ambiguity in this Stock Option Certificate, the
Plan and/or the Plan Summary or the interpretation thereof, shall be
presumed, implied or otherwise construed against the Company or any
other party to this Stock Option Certificate on the basis that such
party was responsible for drafting this Stock Option Certificate.
(b) Cooperation. Each party agrees, without further consideration, to
-----------
cooperate and diligently perform any further acts, deeds and things,
and to execute and deliver any documents that may be reasonably
necessary or otherwise reasonably required to consummate, evidence,
confirm and/or carry out the intent and provisions of this Stock
Option Certificate, all without undue delay or expense.
(c) Interpretation.
--------------
(i) Survival. All representations and warranties made by any party in
--------
connection with any transaction contemplated by this Stock Option
Certificate shall, irrespective of any
-3-
<PAGE>
No. 0__
================================================================================
investigation made by or on behalf of any other party hereto,
survive the execution and delivery of this Stock Option
Certificate and the performance or consummation of any
transaction described in this Stock Option Certificate.
(ii) Entire Agreement/No Collateral Representations. Each party
----------------------------------------------
expressly acknowledges and agrees that this Stock Option
Certificate, together with and subject to the Plan and the Plan
Summary: (1) is the final, complete and exclusive statement of
the agreement of the parties with respect to the subject matter
hereof; (2) supersedes any prior or contemporaneous agreements,
proposals, commitments, guarantees, assurances, communications,
discussions, promises, representations, understandings, conduct,
acts, courses of dealing, warranties, interpretations or terms of
any kind, whether oral or written (collectively and severally,
the "prior agreements"), and that any such prior agreements are
of no force or effect except as expressly set forth herein; and
(3) may not be varied, supplemented or contradicted by evidence
of prior agreements, or by evidence of subsequent oral
agreements. No prior drafts of this Stock Option Certificate, and
no words or phrases from any prior drafts, shall be admissible
into evidence in any action or suit involving this Stock Option
Certificate.
(iii) Amendment; Waiver; Forbearance. Except as expressly provided
------------------------------
otherwise herein, neither this Stock Option Certificate nor any
of the terms, provisions, obligations or rights contained herein
may be amended, modified, supplemented, augmented, rescinded,
discharged or terminated (other than by performance), except as
provided in the Plan or by a written instrument or instruments
signed by all of the parties to this Stock Option Certificate. No
waiver of any breach of any term, provision or agreement
contained herein, or of the performance of any act or obligation
under this Stock Option Certificate, or of any extension of time
for performance of any such act or obligation, or of any right
granted under this Stock Option Certificate, shall be effective
and binding unless such waiver shall be in a written instrument
or instruments signed by each party claimed to have given or
consented to such waiver and each party affected by such waiver.
Except to the extent that the party or parties claimed to have
given or consented to a waiver may have otherwise agreed in
writing, no such waiver shall be deemed a waiver or
relinquishment of any other term, provision, agreement, act,
obligation or right granted under this Stock Option Certificate,
or any preceding or subsequent breach thereof. No forbearance by
a party to seek a remedy for any noncompliance or breach by
another party hereto shall be deemed to be a waiver by such
forbearing party of its rights and remedies with respect to such
noncompliance or breach, unless such waiver shall be in a written
instrument or instruments signed by the forbearing party.
(iv) Remedies Cumulative. The remedies of each party under this Stock
-------------------
Option Certificate are cumulative and shall not exclude any other
remedies to which such party may be lawfully entitled, at law or
in equity.
(v) Severability. If any term or provision of this Stock Option
------------
Certificate or the application thereof to any person or
circumstance shall, to any extent, be determined to be invalid,
illegal or unenforceable under present or future laws, then, and
in that event: (1) the performance of the offending term or
provision (but only to the extent its application is invalid,
illegal or unenforceable) shall be excused as if it had never
been incorporated into this Stock Option Certificate, and, in
lieu of such excused provision, there shall be added a provision
as similar in terms and amount to such excused provision as may
be possible and be legal, valid and enforceable; and (2) the
remaining part of this Stock Option Certificate (including the
application of the offending term or provision to persons or
circumstances other than those as to which it is held invalid,
illegal or unenforceable) shall not be affected thereby, and
shall continue in full force and effect to the fullest extent
provided by law.
-4-
<PAGE>
No. 0__
================================================================================
(vi) Parties in Interest. Notwithstanding anything else to the
-------------------
contrary herein nothing in this Stock Option Certificate shall
confer any rights or remedies under or by reason of this Stock
Option Certificate on any persons other than the parties hereto
and their respective successors and assigns, if any, as may be
permitted under the Plan or hereunder, nor shall anything in
this Stock Option Certificate relieve or discharge the
obligation or liability of any third person to any party to
this Stock Option Certificate, nor shall any provision give any
third person any right of subrogation or action over or against
any party to this Stock Option Certificate.
(vii) No Reliance Upon Prior Representation. Each party acknowledges
-------------------------------------
that: (i) no other party has made any oral representation or
promise which would induce them prior to executing this Stock
Option Certificate to change their position to their detriment,
to partially perform, or to part with value in reliance upon
such representation or promise; and (ii) such party has not so
changed its position, performed or parted with value prior to
the time of the execution of this Stock Option Certificate, or
such party has taken such action at its own risk.
(viii) Headings; References; Incorporation; "Person"; Gender;
------------------------------------------------------
Statutory References. The headings used in this Stock Option
--------------------
Certificate are for convenience and reference purposes only,
and shall not be used in construing or interpreting the scope
or intent of this Stock Option Certificate or any provision
hereof. References to this Stock Option Certificate shall
include all amendments or renewals thereof. All cross-
references in this Stock Option Certificate, unless
specifically directed to another agreement or document, shall
be construed only to refer to provisions within this Stock
Option Certificate, and shall not be construed to be referenced
to the overall transaction or to any other agreement or
document. Any Exhibit referenced in this Stock Option
Certificate shall be construed to be incorporated in this Stock
Option Certificate by such reference. As used in this Stock
Option Certificate, the term "person" is defined in its
broadest sense as any individual, entity or fiduciary who has
legal standing to enter into this Stock Option Certificate such
as, by way of example and not limitation, individual or natural
persons and trusts. As used in this Stock Option Certificate,
each gender shall be deemed to include the other gender,
including neutral genders appropriate for entities, if
applicable, and the singular shall be deemed to include the
plural, and vice versa, as the context requires. Any reference
to statutes or laws will include all amendments, modifications,
or replacements of the specific sections and provisions
concerned.
(d) Enforcement.
-----------
(i) Applicable Law. This Stock Option Certificate and the rights
--------------
and remedies of each party arising out of or relating to this
Stock Option Certificate (including, without limitation,
equitable remedies) shall (with the exception of the Securities
Act and the Blue Sky Laws) be solely governed by, interpreted
under, and construed and enforced in accordance with the laws
(without regard to the conflicts of law principles) of the
Province of Alberta, Canada, as if this Stock Option
Certificate were made, and as if its obligations are to be
performed, wholly within the Province of Alberta, Canada.
(ii) Consent to Jurisdiction; Service of Process. Any "action or
-------------------------------------------
proceeding" (as such term is defined below) arising out of or
relating to this Stock Option Certificate shall be filed in and
heard and litigated solely before the provincial courts of
Alberta, Canada, located within the City of Calgary, Alberta,
Canada. Each party generally and unconditionally accepts the
exclusive jurisdiction of such courts and venue therein;
consents to the service of process in any such action or
proceeding by certified or registered mailing of the summons
and complaint in accordance with the notice provisions of this
Stock Option Certificate; and waives any defense or right to
object to venue in said courts based upon
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the doctrine of "forum non conveniens." The term "action or
proceeding" is defined as any and all claims, suits, actions,
hearings, arbitrations or other similar proceedings, including
appeals and petitions therefrom, whether formal or informal,
governmental or non-governmental, or civil or criminal.
(iii) Waiver of Right to Jury Trial. Each party hereby waives such
-----------------------------
party's respective right to a jury trial of any claim or cause
of action based upon or arising out of this Stock Option
Certificate. Each party acknowledges that this waiver is a
material inducement to each other party hereto to enter into
the transaction contemplated hereby; that each other party has
already relied upon this waiver in entering into this Stock
Option Certificate; and that each other party will continue to
rely on this waiver in their future dealings. Each party
warrants and represents that such party has reviewed this
waiver with such party's legal counsel, and that such party has
knowingly and voluntarily waived its jury trial rights
following consultation with such legal counsel.
(e) Successors and Assigns. All of the representations, warranties,
----------------------
covenants, conditions and provisions of this Stock Option Certificate
shall be binding upon and shall inure to the benefit of each party and
such party's respective successors and permitted assigns, spouses,
heirs, executors, administrators, and personal and legal
representatives .
(f) Notices. Except as otherwise specifically provided in this Stock
-------
Option Certificate, all notices, demands, requests, consents,
approvals or other communications (collectively and severally called
"notices") required or permitted to be given hereunder shall be given
in accordance with the notice provisions in the Plan.
(g) Counterparts. This Stock Option Certificate may be executed in
------------
counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument, binding
on all parties hereto. Any signature page of this Stock Option
Certificate may be detached from any counterpart of this Stock Option
Certificate and reattached to any other counterpart of this Stock
Option Certificate identical in form hereto by having attached to it
one or more additional signature pages.
WHEREFORE, the parties hereto have for purposes of this Stock Option Certificate
executed this Stock Option Certificate in Calgary, Alberta, Canada, effective as
of the Option Effective Date first set forth on the first page of this Stock
Option Certificate.
COMPANY:
Pinnacle Oil International, Inc.,
a Nevada corporation
By:______________________________
RECIPIENT:
_________________________________
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Attachment to Stock Option Certificate
NOTICE OF EXERCISE OF STOCK OPTION
----------------------------------
[To be signed by the Recipient only upon exercise of Option]
TO: Secretary
Pinnacle Oil International, Inc.
840 7/th/ Avenue, Suite 750, Phoenix Place, S.W.
Calgary, Alberta, Canada T2P 3G2
The undersigned, the holder of Options under that certain Stock Option
Certificate (the "Option Certificate") dated effective __________ between
Pinnacle Oil International, Inc., a Nevada corporation (the "Company") and the
undersigned (the "Recipient"), hereby irrevocably elects, in accordance with the
terms and conditions of that certain 1997 Pinnacle Oil International, Inc. Stock
Plan dated July 25, 1997, as it may be amended from time to time (the "Plan"),
under which the Stock Option Certificate was granted, to exercise the
undersigned's Option under the Plan to purchase ________________________________
(______________)/(1)/ shares of the common stock, no par value ("Common Stock")
of the Company (collectively and severally, the "Option Shares"), for the
aggregate purchase price of ($______________)./(2)/.
/(1)/ Insert number of Option Shares as specified in the Stock Option
Certificate which are vested Option Shares (as defined by the Plan)
which the Recipient is exercising the Recipient's Option to
purchase.
/(2)/ Number of Option Shares to be exercised as specified above
multiplied by the Option Price per share ($_____ per share).
The Recipient hereby makes the following acknowledgments to the Company:
A. That the Company shall have the right, if the Recipient is an Employee as
of the date of his, her or its exercise of the Option, to withhold from the
Recipient's compensation such amounts as may be sufficient to satisfy any
federal, state, territorial and/or provincial withholding tax requirements
incident to such exercise pursuant to section 8 of the Plan, and the
---------
Recipient shall remit to the Company any additional amounts which may be
required.
B. That the Company shall have the right (unless the Company in its sole
discretion, and without any obligation to do so) registers the Option
Shares under Form S-8 or any comparable registration statement) to place
the following legend (or any variation thereof determined appropriate by
the Company) on the share certificate or certificates for the Option Shares
to comply with applicable federal, state and territorial securities laws:
"The securities represented by this certificate have not been (1)
registered under the United States Securities Act of 1933, as amended, in
reliance upon an exemption from registration afforded by such act, or (2)
registered under the securities laws of any state or territory of the
United States which may be applicable, in reliance upon an exemption from
registration afforded by such state or territorial securities laws. These
securities have been acquired for the holder's own account for investment
purposes and not with a view for resale or distribution.
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These securities may not be sold or transferred within the United States or
any of its territories unless (1) they have been registered under the
United States Securities Act of 1933 as well as under the securities laws
of any state or territory of the united states as may then be applicable,
or (2) the transfer agent (or the company if then acting as its transfer
agent) is presented with either a written opinion satisfactory to counsel
for the Company or a no-action or interpretive letter from the United
States Securities and Exchange Commission and any applicable state or
territorial securities regulatory agency to the effect that such
registration is not required under the circumstances of such sale or
transfer."
C. That the Company shall have the right (unless the Company in its sole
discretion, and without any obligation to do so) obtains a discretionary
order from any applicable provincial securities commission, to place the
following legend (or any variation thereof determined appropriate by the
Company) on the share certificate or certificates for the Option Shares to
comply with applicable provincial securities laws:
"Residents of Alberta or any other province of Canada are subject to an
indefinite hold period, and the transfer of these securities by a resident
of these provinces can only be effectuated pursuant to an exemption from
the registration and prospectus requirements of the applicable securities
act of such provinces or pursuant a discretionary order of the applicable
securities commission."
D. That the Company shall have the right to place the following legend (or any
variation thereof determined appropriate by the Company) on the share
certificate or certificates for the Option Shares to comply with the Drag-
Along Rights granted to the Company pursuant to section 14 of the Plan:
----------
"The securities represented by this certificate are subject to certain
drag-along rights set forth in full in that certain 1997 Pinnacle Oil
International, Inc. Stock Plan dated July 25, 1997, as it may be amended or
restated from time to time, a copy of which may be inspected by authorized
persons at the principal office of the Company, and all the provisions of
which are incorporated by reference in this certificate."
The Recipient hereby makes the following representations, warranties or
covenants to the Company, each of which is deemed to be a separate
representation, warranty and covenant:
A. The Recipient's permanent legal residence and domicile, if the Recipient is
an individual, or permanent legal executive offices and principal place of
business, if the Recipient is an Entity, is in the State, territory or
province specified below the Recipient's signature below on this Notice as
of the time of his, her or its exercise of the Stock Option Certificate.
B. The Recipient, if a natural person, is age eighteen (18) or over.
C. The Recipient has received a copy of the Plan as well as a copy of the 1997
Pinnacle Oil International, Inc. Stock Plan Summary (the "Plan Summary"),
which explains the administration and operation of the Plan, risk factors
concerning an investment in the Common Stock and the Company, the tax
consequences of grants of Options under the Plan, and certain other
relevant matters pertaining to the Plan, and has read and understood the
Plan and the Plan Summary.
D. The Recipient:
1. has taken the opportunity, prior to exercising the Option, to engage
such investment professionals and advisors including, without
limitation, accountants, appraisers, investment, tax and legal
advisors, each of whom are independent of the Company and its advisors
and agents, to:
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No. 0__
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(A) conduct such due diligence review as the Recipient and/or such
investment professionals and advisors deem necessary or
advisable; and
(B) to provide such opinions as to (i) the investment merits of a
proposed investment in the Option Shares, the tax consequences of
the grant and exercise of the Option, and the subsequent
disposition of the Option Shares, and (ii) the effect of same
upon the Recipient's personal financial circumstances, as the
Recipient and/or his, her or its investment professionals and
advisors have or may deem advisable; and
2. has received, to the extent he, she or it has availed himself, herself
or itself of these opportunities, satisfactory information and answers
from such investment professionals and advisors.
E. Without limiting the generality of the immediately preceding
paragraph, prior to exercising the Option:
1. the Recipient and his, her or its investment professionals and
advisors have taken the opportunity, to the extent the Recipient
and/or such investment professionals and advisors have determined it
to be necessary, to:
(A) be provided with financial and other written information (in
addition to that contained in the Plan and Plan Summary);
(B) ask questions and receive answers concerning the terms and
conditions of the Stock Option Certificate, an investment in the
Option Shares, and the business of the Company and its finances;
and
(C) review all documents, books and records of the Company; and
2. the Recipient and/or his, her or its investment professionals and
advisors have received, to the extent they have availed themselves of
these opportunities, satisfactory information and answers.
F. With the exception of written information given to the Recipient by the
principal executive officers of the Company, no person has provided any
information (other than the provision of the Plan and Plan Summary), or
made any representations to the Recipient, concerning the Company or its
past, present or future business; on which the Recipient has relied in
offering to purchase the Option Shares.
G. The Recipient has been informed and understands and agrees as follows:
1. Unless and to the extent the Company has registered the Option Shares
there are substantial restrictions on the transferability of the
Option Shares as set forth in the Plan and as are more particularly
described in the Plan Summary;
2. as a result of such restrictions,
(A) it may not be possible for the Recipient to sell or otherwise
liquidate the Option Shares in the case of emergency and/or other
need, and the Recipient must therefore be able to hold the Option
Shares until the lapse of said restrictions,
(B) the Recipient must have adequate means of providing for the
Recipient's current needs and personal contingencies, and
(C) the Recipient must have no need for liquidity in an investment in
the Option Shares; and
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3. the Recipient has evaluated the Recipient's financial resources and
investment position in view of the foregoing, and the Recipient is
able to bear the economic risk of an investment in the Option Shares.
H. Unless and to the extent the Company has registered the Option Shares:
1. the Option Shares will be purchased by the Recipient as principal and
not by any other person, with the Recipient's own funds and not with
the funds of any other person, and for the account of the Recipient
and not as a nominee or agent and not for the account of any other
person;
2. the Recipient will purchase the Option Shares for investment purposes
only for an indefinite period, and not with a view to the sale or
distribution of any part or all thereof by public or private sale or
other disposition; and
3. no person other than the Recipient will have any interest, beneficial
or otherwise, in the Option Shares, and the Recipient is not obligated
(and will not be obligated at time of exercise) to transfer the Option
Shares to any other person, nor does the Recipient have any agreement
or understanding to do so.
I. The Recipient has complied with all applicable investment laws and
regulations in force relating to the legality of an investment in the
Option Shares by the Recipient in any jurisdiction in which he, she or it
purchases the Option Shares, and has obtained any consent, approval or
permission required of him, her or it for the purchase of the Option Shares
under the investment laws and regulations in force in any jurisdiction to
which he, she or it is subject, or in which he, she or it makes such
purchase, and the Company shall have no responsibility therefor.
J. With the exception of the provision of the Plan and the Plan Summary, the
Recipient has not seen, received, been presented with or been solicited by
any advertisement, article, notice, leaflet or other communication (whether
published in any newspaper, magazine, or similar media or broadcast over
television or radio or otherwise generally disseminated or distributed); or
through any public or promotional seminar or meeting to which the Recipient
was invited through any such advertisement, article, notice, leaflet or
other communication.
K. The Recipient has not retained any broker-dealer, placement agent or finder
to whom the Company will have any obligation to pay any commissions or
fees.
Each of the foregoing representations, warranties and covenants of the Recipient
shall be deemed made as of the date the Recipient exercises this Option, and
shall survive the date of closing with respect to the exercise of the last
Option hereunder.
Signature must conform in all respects to name of the Recipient as specified in
the Plan, unless the undersigned is the Recipient's Successor, in which case the
undersigned must submit appropriate proof of the right of the undersigned to
exercise the Option.
Signature: _______________________________
Print Name: _______________________________
Address: _______________________________
_______________________________
Date: _______________________________
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EXHIBIT 4.5
1999 PINNACLE OIL INTERNATIONAL, INC.
EXECUTIVE STOCK OPTION PLAN
The Board of Directors of Pinnacle Oil International, Inc. (the "Company"),
a corporation organized under the laws of the State of Nevada, hereby adopts
this 1999 Pinnacle Oil International, Inc. Executive Stock Option Plan.
WHEREAS, the growth, development and financial success of the Company (and
any parents and/or any subsidiaries of the Company) is and will remain
dependent, in significant part, upon the judgment, initiative, efforts and/or
services their principal executive officers;
WHEREAS, the Company desires, in order to attract, compensate and motivate
selected executive officers for the Company (and any parent and/or any
subsidiaries of the Company), and to appropriately compensate them for their
efforts, to create a stock option plan which will enable the Company, in its
sole discretion and from time-to-time, to offer to or provide such persons with
incentives and/or inducements in the form of options to acquire capital stock of
the Company, thereby affording such persons with an opportunity to share in
potential capital appreciation in the capital stock of the Company and/or
potential distributions made in connection therewith;
WHEREAS, the Company further desires that the stock plan be structured to
permit it, in its sole discretion, to offer and issue options to purchase
capital stock which are classified as incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended;
WHEREAS, the Company further desires that the stock plan be structured to
permit it, in its sole discretion, to offer and issue options to acquire capital
stock in reliance upon certain exemptions from registration or qualification
afforded under certain federal, state, territorial and/or provincial securities
laws to be selected by the Company as are or may become applicable; and
WHEREAS, insofar as the Company's common stock is currently registered
under Section12(g) of the Securities and Exchange Act of 1934, the Company
desires that the stock plan be structured to comply with the Securities and
Exchange Act of 1934 for so long as the Company's common stock or any of its
other equity securities are registered under Sections 12(b) or 12(g) of the
Securities and Exchange Act of 1934.
ARTICLE I
DEFINITIONS
-----------
Set forth below are definitions of capitalized terms which are generally
used throughout the Plan, or references to provisions containing such
definitions (Capitalized terms used only in a specific section of the Plan are
defined in such section):
1.01 "Applicable Laws" means the requirements relating to the
administration of stock plans under: (i) applicable corporate laws of the United
States and the State of Nevada and, to the extent applicable, any foreign
country or jurisdiction where Options are, or will be, granted under the Plan,
including Canada and the Province of Alberta; (ii) applicable Securities Laws
(including those of any foreign country or jurisdiction where Options are, or
will be, granted under the Plan, including Canada and the Province of Alberta),
(iii) the Code; and (iv) any stock exchange or quotation system on which the
Common Stock is listed or quoted.
1.02 "Approved Corporate Transaction" shall mean any time the Board and/or,
to the extent required by law, the stockholders of the Company, approve either:
(i) a merger or
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consolidation or stock exchange or divisive reorganization (i.e., spin-off,
split-off or split-up) and/or other reorganization with respect to the Company
and/or its stockholders, or (ii) the sale, transfer, exchange or other
disposition by the Company of fifty percent (50%) or more of its assets in a
single or series of related transactions, is approved, provided, however, the
term Approved Corporate Transaction shall not include any transaction wherein
the stockholders of the Company immediately before such transaction directly or
indirectly own, immediately following such transaction, a majority of the Total
Combined Voting Power (as such term is defined in section 1.05A below) of the
-------------
outstanding Voting Securities (as such term is defined in section 1.05A below)
-------------
of the surviving corporation (or other entity) resulting from such transaction
pursuant to clause (i), or the acquiring corporation (or other entity) pursuant
to clause (ii).
1.03 "Blue Sky Laws" shall mean the securities laws of any state or
territory of the United States, including any regulations or rules promulgated
thereunder, which may apply to a transaction described in this Plan by reason
of, among other things, the Recipient's residing in such, state and/or territory
at the time of such transaction.
1.04 "Board" shall mean the Board of Directors of the Company, as such body
may be reconstituted from time to time.
1.05 "Change In Control" shall mean the occurrence of any "Control
Acquisition" or any "Significant Board Change" (as such terms are defined
below).
A. "Control Acquisition" shall mean any time an "Acquiring Person"
attains, by reason of and immediately after a transaction or series of related
transactions (other than a "Non-Control Transaction"), "Beneficial Ownership" of
fifty percent (50%) or more of the "Total Combined Voting Power" of the
Company's then outstanding "Voting Securities" (all as defined below); unless
the Board determines that it is not in the best interests of the Company for
such transaction to be construed as a Control Acquisition; provided, however
that at the time of such approval of the Board there are then in office not less
than two Continuing Directors (as such term is defined below) and such action or
transaction or series of related actions or transactions are approved by a
majority of the Continuing Directors then in office.
(1) "Acquiring Person" shall mean any "Person" (as defined below)
with the exception of: (A) any Employee Benefit Plan (or a trust forming a
part thereof) maintained by the Company, or by any corporation or entity in
which the Company holds fifty percent (50%) or more of the Voting
Securities (each, a "Controlled Subsidiary"); (B) the Company or any
Controlled Subsidiary; or (C) any Person which acquires the threshold
percentage of Voting Securities through a Non-Control Transaction.
(2) "Non-Control Transaction" shall mean any transaction in which
the stockholders of the Company immediately before such transaction
directly or indirectly own, immediately following such transaction, at
least a majority of the Total Combined Voting Power (as defined below) of
the outstanding Voting Securities (as defined below) of the surviving
corporation (or other entity) resulting from such transaction, in
substantially the same proportion as such stockholders' ownership of the
Company's Voting Securities immediately before such transaction.
(3) "Person," "Beneficial Ownership," "Total Combined Voting Power"
and "Voting Securities" shall have the meaning described to such terms in
Sections 13(d) and 14(d) of the Exchange Act and Rule 13d-3 promulgated
thereunder.
(4) "Continuing Director" shall mean: (A) any member of the Board,
while such Person is a member of the Board, who is not an Acquiring Person
or an "Affiliate"
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or "Associate" (as defined below) of an Acquiring Person, or a
representative of an Acquiring Person or any such Affiliate or Associate,
and was a member of the Board prior to the date of this Plan, or (B) any
Person who subsequently becomes a member of the Board, while such Person is
a member of the Board, who is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or a representative of an Acquiring Person
or any such Affiliate or Associate, if such Person's nomination for
election or election to the Board is recommended or approved by a majority
of the Continuing Directors. The terms "Affiliate" and "Associates" shall
have the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(5) Notwithstanding the foregoing, a Control Acquisition shall not
be deemed to have occurred solely because any Person acquires Beneficial
Ownership of more than the threshold percentage of the outstanding Voting
Securities as a result of an acquisition of Voting Securities by the
Company (each, a "Redemption") which, by reducing the number of Voting
Securities outstanding, increased the percentage of outstanding Voting
Securities Beneficially Owned by such Person; provided, however, that if
(A) a Control Acquisition would occur as a result of a Redemption but for
the operation of this sentence, and (B) after such Redemption, such Person
becomes the Beneficial Owner of any additional Voting Securities, which
increase the percentage of the then outstanding Voting Securities
Beneficially Owned by such Person over the percentage owned as a result of
the Redemption, then a Control Acquisition shall occur.
B. "Significant Board Change" shall mean any time, during any period
of three (3) consecutive years after the date of this Agreement, wherein the
individuals who constituted the Board at the beginning of such period (the
"Incumbent Board") cease to constitute a majority of the Board, for any reason
other than: (1) the voluntary resignation of one or more Board members; (2) the
refusal by one or more Board members to stand for election to the Board; and/or
(3) the removal of one or more Board members for good cause; provided, however,
(A) that if the nomination or election of any new director of the Company was
approved by a vote of at least a majority of the Incumbent Board, such new
director shall be deemed a member of the Incumbent Board; and (B) that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act), or as a result of a solicitation of proxies or consents by or on
behalf of an Acquiror, other than a member of the Board (a "Proxy Contest"), or
as a result of any agreement intended to avoid or settle any Election Contest or
Proxy Contest.
1.06 "Code" shall mean the United States Internal Revenue Code of 1986, as
amended (references herein to sections of the Code are intended to refer to
sections of the Code as enacted at the time of the adoption of the Plan by the
Board and as subsequently amended, or to any substantially similar successor
provisions of the Code resulting from recodification, renumbering or otherwise).
1.07 "Commission" shall mean the United States Securities and Exchange
Commission.
1.08 "Common Stock" shall mean the Company's common stock, par value
$0.001.
1.09 "Company" shall mean Pinnacle Oil International, Inc., a Nevada
corporation and its successors.
1.10 "Consent of Spouse" shall mean that Consent of Spouse in such form as
prescribed by the Plan Administrator from time-to-time.
1.11 "Disability" (or the related term "Disabled") shall be defined,
without limitation, as any of the following: (i) the receipt of any disability
insurance benefits by the Recipient; (ii) a
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declaration by a court of competent jurisdiction that the Recipient is legally
incompetent; (iii) the Recipient's material inability due to medically
documented mental or physical illness or disabilities to fully perform the
Recipient's regular obligations as an Employee under such office, with
reasonable accommodation if then required by applicable federal, state,
territorial and/or provincial laws or regulations, for a three (3) month
continuous period, or for six (6) cumulative months within any one (1) year
continuous period, or the reasonable determination by the Board that the
Recipient will not be able to fully perform the Recipient's regular obligations
as an Employee under such office, with reasonable accommodation if then required
by applicable federal, state, territorial and/or provincial laws or regulations,
for a three (3) month continuous period. If the Board determines that the
Recipient is Disabled under clause (iii) above, and the Recipient disagrees with
------------
the conclusion of the Board, then the Company shall engage a qualified
independent physician reasonably acceptable to the Recipient to examine the
Recipient at the Company's sole expense. The determination of such physician
shall be provided in writing to the parties and shall be final and binding upon
the parties for all purposes of this Agreement. The Recipient hereby consents to
examination in the manner set forth above, and waives any physician-patient
privilege arising from any such examination as it relates to the determination
of the purported disability.
1.12 "Eligible Executive Officer" shall mean any Employee who is a natural
person who, at the applicable time of the grant or award of an Option under the
Plan, is also an Executive Officer of the Company and/or of any Parent and/or of
any Subsidiary. Notwithstanding the foregoing, no Option hereunder may be
granted with respect to: (i) any circumstances which would not be considered to
be either a bonus or reward for services provided, or compensation for goods or
services rendered; or (ii) services rendered wholly or partially in connection
with the offer and sale of securities in a capital-raising transaction.
1.13 "Employee" shall mean any employee of the Company and/or of any Parent
and/or of any Subsidiary, whether such Person is so employed at the time the
Plan is adopted or becomes so employed subsequent to the adoption of the Plan.
1.14 "Executive Officer" shall mean the Company's president, principal
financial officer, principal accounting officer (or, if there is no such
accounting officer, the controller), any vice-president of the Company in charge
of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the Company. Officers of any Parent and/or of any Subsidiary of the Company
shall be deemed Executive Officers of the Company if they perform such policy-
making functions for the Company.
1.15 "Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, including any regulations or rules promulgated by the Commission
thereunder (references herein to sections of the Exchange Act are intended to
refer to sections of the Exchange Act as enacted at the time of the adoption of
the Plan by the Board and as subsequently amended, or to any substantially
similar successor provisions of the Exchange Act resulting from recodification,
renumbering or otherwise).
1.16 "Fair Market Value" of a share of Common Stock as of a given valuation
date shall be determined as follows:
A. If the Common Stock is traded on a stock exchange, the Fair Market
Value will be equal to the closing price of Common Stock on the principal
exchange on which the Common Stock is then trading as reported by such exchange
(or as reported by any composite index which includes such principal exchange)
for the trading day previous to the date of valuation, or if the Common Stock is
not traded on such date, on the next preceding trading day during which a trade
occurred;
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B. If the Common Stock is traded over-the-counter on the Nasdaq
National Market on the date in question, the Fair Market Value will be equal to
the last transaction-price of the Common Stock as reported by Nasdaq for the
trading day previous to the date of valuation, or if the Common Stock is not
traded on such date, on the next preceding trading day during which a trade
occurred;
C. If the Common Stock is traded over-the-counter on the Nasdaq
SmallCap Market, the Fair Market Value will equal the mean between the last
reported closing representative bid and asked price for the Common Stock as
reported by Nasdaq for the trading day previous to the date of valuation, or if
the Common Stock is not traded on such date, on the next preceding trading day
during which a trade occurred; or
D. If the Common Stock is not publicly traded on an exchange and is
not traded over-the-counter on Nasdaq, the Fair Market Value shall be determined
by the Board acting in good faith on such basis as it deems appropriate,
including quotations by market makers if the Common Stock is traded over-the-
counter on the NASD Electronic Bulletin Board or Pink Sheets on the date in
question should the Plan Administrator deem such quotations to be appropriate
given the volume and circumstances of trades.
E. The Fair Market Value as determined above shall be subject to such
discount as the Plan Administrator may, in its sole discretion and without
obligation to do so, determine to be appropriate to reflect any such impairments
to the value of the associated Option Shares to which the valuation relates such
as, by way of example and not limitation, (1) the fact that such Option Shares
constitute unregistered securities (whether or not considered "restricted stock"
within the meaning of Rule 144 of the Securities Act), and/or (2) such Option
Shares are subject to conditions, risk of forfeiture, or repurchase rights or
rights of first refusal which impair their value; provided, however, in the
event of the grant or award of an Incentive Option, no discount shall be given
with respect to any impairments in value attributable to any restriction which,
by its terms, will never lapse within the meaning of Section 422(c)(7) of the
Code.
1.17 "Incentive Option" shall mean an Option which qualifies under Section
422 of the Code, and is specifically granted as an Incentive Option under the
Plan in accordance with the applicable provisions of Article V.
---------
1.18 "Non-Qualified Option" shall mean any Option granted under the Plan
other than an Incentive Option; provided, however, the term Non-Qualified Option
shall include any Incentive Option which at any time fails, for any reason, to
qualify as an incentive stock option under Section 422 of the Code and the rules
and regulations thereunder.
1.19 "Option" shall mean an option to purchase Option Shares granted or
awarded pursuant to Article V. Unless specific reference is made thereto, the
---------
term "Options" shall be construed as referring to both Non-Qualified Options
(including Replacement Options) and Incentive Options.
1.20 "Option Price" is defined in section 5.02 of the Plan.
------------
1.21 "Option Shares" shall mean any Option Shares which an Option entitles
the holder thereof to purchase.
1.22 "Parent" shall mean any "parent" of the Company, as such term is
defined by, or interpreted under, Rule 405 of Regulation C promulgated under the
Securities Act, including any such parent which is a corporation, partnership,
limited partnership or limited liability company to the extent permitted under
Rule 405 of Regulation C.
-5-
<PAGE>
1.23 "Person" shall be defined, in its broadest sense, as any individual,
entity or fiduciary such as, by way of example and not limitation, individual or
natural persons, corporations, partnerships (limited or general), joint-
ventures, associations, limited liability companies/partnerships or fiduciary
arrangements (such as trusts and custodial arrangements).
1.24 "Plan" shall mean this 1999 Pinnacle Oil International, Inc. Executive
Stock Option Plan.
1.25 "Plan Administrator" shall refer to the Person or Persons who are
administering the Plan as described in Article III, to wit, the Board, the Plan
-----------
Committee, or any Director-Officers designated by the Board or the Plan
Committee.
1.26 "Plan Committee" shall mean that Committee comprised of members of the
Board that may be appointed by the Board to administer and interpret the Plan as
more particularly described in Article III of the Plan.
-----------
1.27 "Option Shares" shall refer to shares of Common Stock issuable in
connection with Options granted in accordance with section 4.01.
------------
1.28 "Provincial Securities Laws" shall mean the securities laws of any
province of Canada, including any regulations or rules promulgated thereunder,
which may apply to a transaction described in this Plan by reason of, among
other things, the Company's principal executive offices being located in such
province or a Recipient residing in such province, at the time of such
transaction.
1.29 "Recipient" shall mean any Eligible Executive Officer who, at a
particular time, receives the grant of an Option.
1.30 "Recipient's Representative's Letter" shall mean that letter from an
independent investment advisor of a Recipient in such form as prescribed by the
Plan Administrator from time-to-time.
1.31 "Replacement Option" shall mean a Non-Qualified Option specifically
granted as a Replacement Option under the Plan in accordance with the applicable
provisions of section 5.08.
------------
1.32 "Reporting Company" shall mean a corporation which registers its
equity securities pursuant to Sections 12(b) or 12(g) of the Exchange Act;
provided, however, any foreign corporation which registers its equity securities
as a "foreign private issuer" shall not be deemed a Reporting Company for
purposes of this Plan unless and until such time as it is required or elects to
register its equity securities as a foreign issuer other than a foreign private
issuer.
1.33 "Securities Act" shall mean the Securities Act of 1933, as amended,
including all regulations or rules promulgated by the Commission thereunder
(references herein to sections of the Securities Act are intended to refer to
sections of the Securities Act as enacted at the time of the adoption of the
Plan by the Board and as subsequently amended, or to any substantially similar
successor provisions of the Securities Act resulting from recodification,
renumbering or otherwise).
1.34 "Securities Laws" shall collectively refer to the Securities Act, the
Exchange Act, the Blue Sky Laws and the Provincial Securities Laws.
1.35 "Stock Option Certificate" shall refer to a Stock Option Certificate
in such form as prescribed by the Plan Administrator from time-to-time;
provided, however, the Company may, in its sole discretion, (1) revise any such
form of Stock Option Certificate to reflect or incorporate such changes as the
Company or its legal counsel may determine is appropriate and consistent with
the
-6-
<PAGE>
terms of the Plan, and/or (2) evidence or confirm the grant of an Option in
a written employment or consulting agreement in lieu of the form of any of the
foregoing Stock Option Certificates.
1.36 "Subsidiary" shall mean any "majority-owned subsidiary" of the
Company, as such term is defined by, or interpreted under, Rule 405 of
Regulation C promulgated under the Securities Act, including any such subsidiary
which is a corporation, partnership, limited partnership or limited liability
company to the extent permitted under Rule 405 of Regulation C. The term
Subsidiary shall specifically exclude any majority-owned subsidiaries (other
than the Company, if applicable) of any Parent.
1.37 "Ten Percent Stockholder" shall mean a Person who owns, either
directly or indirectly, at the time such Person is granted an Option, stock of
the Company possessing more than ten percent (10%) of the total combined voting
power or value of all classes of stock of the Company or of any Parent and/or
any Subsidiary.
1.38 "Termination By Company For Cause" shall mean a determination by the
Plan Administrator that:
A. Any representation or warranty of the Recipient in connection with
the grant and/or subsequent exercise of an Option is not materially true,
accurate and complete;
B. The Recipient has breached or wrongfully failed and/or refused to
fulfill and/or perform any of the Recipient's obligations, promises or covenants
under the underlying Stock Option Certificate;
C. The Recipient has breached or wrongfully failed and/or refused to
fulfill and/or perform any of the Recipient's representations, warranties,
obligations, promises or covenants in any agreement (other than the Stock Option
Certificate) entered into between the Company and the Recipient, without cure,
if any, as provided in such agreement;
D. The Recipient has failed and/or refused to obey any lawful and
proper order or directive of the Board, and/or the Recipient has intentionally
interfered with the compliance by other employees of the Company with any such
orders or directives;
E. The Recipient has breached the Recipient's fiduciary duties to the
Company;
F. The Recipient has caused the Company to be convicted of a crime, or
intentionally caused the Company to incur criminal penalties in material
amounts;
G. The Recipient has committed: (A) any act of fraud,
misrepresentation, theft, embezzlement or misappropriation, and/or any other
dishonest act against the Company and/or any of its affiliates, subsidiaries,
joint ventures; or (B) any other offense involving moral turpitude, which
offense is followed by conviction or by final action of any court of law; or (C)
a felony;
H. The Recipient has used alcohol or drugs to an extent that such use:
(A) interfered with or was likely to interfere with the Recipient's ability to
perform the Recipient's duties to the Company; and/or (B) such use endangers or
was likely to endanger the life, health, safety, or property of the Recipient,
the Company, and/or any other person;
I. The Recipient has demonstrated or committed such acts racism,
sexism or other discrimination as would tend to bring the Company into public
scandal or ridicule, or would otherwise result in material and substantial harm
to the Company's business, reputation, operations, affairs or financial
position; and/or
-7-
<PAGE>
J. The Recipient engaged in other conduct constituting cause for
termination.
1.39 "Termination By Recipient For Good Reason" shall mean the following:
A. The Company's representations or warranties in the Stock Option
Certificate are not materially true, accurate and complete;
B. The Company has intentionally and continually breached or
wrongfully failed and/or refused to fulfill and/or perform any of the Company's
obligations, promises or covenants under the underlying Stock Option
Certificate;
C. The Company has intentionally and continually breached or
wrongfully failed and/or refused to fulfill and/or perform any of the Company's
representations, warranties, obligations, promises or covenants in any agreement
(other than the Stock Option Certificate) entered into between the Company and
the Recipient, without cure, if any, as provided in such agreement; and/or
D. The Company intentionally requires the Recipient to commit or
participate in any felony or other serious crime.
1.40 "Termination Of Recipient" is defined as the time when the employee-
employer relationship between the Recipient and the Company (or any Parent or
Subsidiary) is terminated for any reason whatsoever, whether voluntary or
involuntary (including death or Disability), or with or without good cause,
including, but not by way of limitation, termination by resignation, discharge,
retirement, or leave of absence, but excluding terminations where: (1) the
Recipient remains employed by the Company (if such termination relates to the
Recipient's employment with any Parent and/or any Subsidiary) and/or by any
Parent and/or any Subsidiary (if such termination relates to the Recipient's
employment with the Company); (2) there is simultaneous employment of the
Recipient by the Company and/or any Parent and/or any Subsidiary; and/or (3)
there is a simultaneous establishment of a consulting relationship between the
Company and the Recipient.
1.41 "Transfer" shall mean any transfer or alienation of an Option which
would directly or indirectly change the legal or beneficial ownership thereof,
whether voluntary or by operation of law, and regardless of payment or provision
of consideration, including, by way of example and not limitation: (i) the
sale, assignment, bequest or gift of the Option; (ii) any transaction that
creates or grants an option, warrant, or right to obtain an interest in the
Option; (iii) any transaction that creates a form of joint ownership in the
Option between the Recipient and one or more other Persons; (iv) any Transfer of
the Option to a creditor of the Recipient, including the hypothecation,
encumbrance or pledge of the Option or any interest therein, or the attachment
or imposition of a lien by a creditor of the Recipient on the Option or any
interest therein which is not released within thirty (30) days after the
imposition thereof; (v) any distribution by a Recipient which is an entity to
its stockholders, partners, co-venturers or members, as the case may be; or (vi)
any distribution by a Recipient which is a fiduciary such as a trustee or
custodian to its settlors or beneficiaries.
1.42 "Withholding Taxes" means any federal, state, territorial, provincial
and/or local employment taxes which the Company shall have the obligation to
withhold from a Recipient in connection with the grant and/or exercise of any
Option.
-8-
<PAGE>
ARTICLE II
TERM OF PLAN
------------
2.01 Effective Date for Plan; Termination Date for Plan. The Plan shall be
--------------------------------------------------
effective as of such time and date as the Plan is adopted by the Board, and the
Plan shall terminate on the first business day prior to the ten (10) year
anniversary of the date the Plan became effective. No Options shall be granted
or awarded under the Plan before the date the Plan becomes effective or after
the date the Plan terminates; provided, however: (i) all Options granted
pursuant to the Plan prior to the effective date of the Plan shall not be
affected by the termination of the Plan; and (ii) all other provisions of the
Plan shall remain in effect until the terms of all outstanding Options have been
satisfied or terminated in accordance with the Plan and the terms of such
Options.
2.02 Failure of Stockholders to Approve Plan. In the event the Plan is not
---------------------------------------
approved by the holders of a majority of the shares of Common Stock of the
Company within twelve (12) months before or after the date the Plan becomes
effective pursuant to section 2.01, then any Incentive Options granted under the
------------
Plan shall be reclassified as Non-Qualified Options retroactive to the date of
grant.
ARTICLE III
PLAN ADMINISTRATION
-------------------
3.01 General. The Plan shall be administered exclusively by the Board
-------
and/or, to the extent authorized pursuant to this Article III, the Plan
-----------
Committee or Director-Officers (collectively, the "Plan Administrator").
3.02 Delegation to Plan Committee. Subject to the authority granted to the
----------------------------
Board under the Articles of Incorporation and the Bylaws of the Company, the
Board may, in its sole discretion and at any time, establish a committee
comprised of two (2) or more members of the Board (the "Plan Committee") to
administer the Plan either in its entirety or to administer such functions
concerning the Plan as delegated to such Committee by the Board. Members of the
Plan Committee may resign at any time by delivering written notice to the Board.
Vacancies in the Plan Committee shall be filled by the Board. The Plan
Committee shall act by a majority of its members in office. The Plan Committee
may act either by vote at a meeting or by a memorandum or other written
instrument signed by a majority of the Plan Committee.
3.03 Compliance with Rule 16b-3 of the Exchange Act. Anything in this
----------------------------------------------
Article III to the contrary notwithstanding, so long as this Company continues
- -----------
as a Reporting Company or is otherwise required to register its equity
securities under Sections 12(b) or 12(g) of the Exchange Act, any matter
concerning a grant or award of an Option under the Plan to any Director,
Executive Officer or Ten Percent Stockholder shall, to the extent desirable to
qualify such Options as exempt under Rule 16b-3(b)(3) promulgated under the
Exchange Act, be made only by: (i) the Board; (ii) the Plan Committee (provided
it is comprised solely of "Non-Employee Directors" within the meaning of Rule
16b-3(b)(3)); or (iii) a special committee of the Board, or subcommittee of the
Plan Committee, comprised solely of two (2) or more members of the Board who are
non-Employee Directors.
3.04 Compliance with Section 162(m) of the Code. Anything in this Article
------------------------------------------ -------
III to the contrary notwithstanding, in the event and commencing at such time as
- ---
any grant of an Option shall be subject to the deduction limitations prescribed
by Section 162(m) of the Code, and the Plan Administrator determines it to be
desirable to qualify Options granted hereunder as "performance-based
compensation" within the meaning of Section 162(m), the Plan Administrator shall
(for purposes of making such grant) consist of a special committee of the Board
comprised solely of two or more "outside directors" within the meaning of
Section 162(m).
-9-
<PAGE>
3.05 Delegation to Director-Officers. Subject to the authority granted to
-------------------------------
the Board under the Articles of Incorporation and the Bylaws of the Company, the
Board may, in its sole discretion and at any time, and subject to the authority
granted to it by the Board, the Plan Committee may, in its sole discretion and
at any time, delegate all or any portion of their authority described below
under section 3.06(i) through section 3.06(ii) to one or more Directors who are
--------------- ----------------
also Director-Officers, provided that the Board or the Plan Committee (as the
case may be) ratifies such actions by such designated Director-Officers.
Notwithstanding the foregoing, so long as the Company continues as a Reporting
Company no authority shall be delegated to the aforesaid Director-Officers with
respect to any matter concerning a grant or award of an Option under the Plan to
any Director, Executive Officer or Ten Percent Stockholder.
3.06 Authority to Grant Options and to Determine Terms and Conditions of
-------------------------------------------------------------------
Grant. Subject to any limitations prescribed by the Articles of Incorporation
- -----
and Bylaws of the Company, and further subject to the express terms, conditions,
limitations and other provisions of the Plan, the Plan Administrator shall have
the full and final authority, in its sole discretion at any time and from time-
to-time, to do any of the following: (i) designate and/or identify the Persons
or classes of Persons who are considered Eligible Executive Officers; (ii) grant
Options to such selected Eligible Executive Officers or classes of Eligible
Executive Officers in such form and amount as the Plan Administrator shall
determine; (iii) determine the number of Option Shares to be covered by each
Option; (iv) approve forms of Stock Option Certificates for use under the Plan;
(v) impose such terms, limitations, restrictions and conditions upon any Option
as the Plan Administrator shall deem appropriate and necessary including,
without limitation: (1) the date of grant of the Option; (2) the time or times
when Options may be exercised (which may be based on performance criteria); and
(3) any vesting and/or forfeiture conditions placed upon any Options; (vi)
require as a condition of the grant of an Option that the Recipient surrender
for cancellation some or all of any unexercised Options which have previously
been granted to the Recipient under the Plan or otherwise (an Option whose grant
is conditioned upon such surrender may have a price or value lower {or higher}
than the surrendered Option; may cover the same {or a lesser or greater} number
of shares of Common Stock as such surrendered Option; may contain such other
terms as the Plan Administrator deems appropriate and necessary; and shall be
exercisable in or granted in accordance with its terms, without regard to the
number of shares, price, exercise period or any other term or condition of such
surrendered Option); (vii) approve the reduction in the exercise price of any
Option to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option shall have declined since the date such
Option was granted; (viii) determine the type and value of consideration which
the Company will accept from Recipients in payment for the exercise of Options;
(ix) adopt, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax laws, and
make all other determinations and take all other action necessary or advisable
for the implementation and administration of the Plan; (xi) modify or amend each
Option (subject to Article XVI), including the discretionary authority to extend
the post-termination exercise period of Options longer than is otherwise
provided for in the Plan; and (xii) agree to withhold Option Shares in
satisfaction of any applicable Withholding Taxes. In determining the recipient,
form and amount of Options, the Plan Administrator shall consider any factors it
may deem relevant such as, by way of example and not limitation or obligation,
the Recipient's functions, responsibilities, value of services to the Company,
and past and potential contributions to the Company's profitability and sound
growth.
3.07 Authority to Interpret Plan; Binding Effect of All Determinations. The
-----------------------------------------------------------------
Plan Administrator shall, in its sole and absolute discretion, interpret and
determine the effect of all matters and questions relating to the Plan
including, without limitation, all questions relating to whether a Termination
Of Recipient has occurred such as, by way of example and not limitation, those
relating to the effect of a leave of absence, a change in status from an
employee to an independent contractor, and/or any other change in the employer-
employee relationship. All interpretations and
-10-
<PAGE>
determinations of the Plan Administrator under the Plan (including, without
limitation, determinations pertaining to the eligibility of Persons to receive
Options, the form, amount and timing of Options, the methods of payment for
Options, the restrictions and conditions placed upon Options, and the other
terms and provisions of Options and the certificates or agreements evidencing
same) need not be uniform and may be made by the Plan Administrator selectively
among Persons who receive, or are eligible to receive, Options under the Plan,
whether or not such Persons are similarly situated. All actions taken and all
interpretations and determinations made under the Plan in good faith by the Plan
Administrator shall be final and binding upon the Recipient, the Company, and
all other interested Persons. No member of the Plan Administrator shall be
personally liable for any action taken or decision made in good faith relating
to the Plan, and all Persons constituting the Plan Administrator shall be fully
protected and indemnified to the fullest extent permitted under applicable law
by the Company in respect to any such action, determination, or interpretation.
3.08 Compensation; Advisors. Members of the Plan Administrator shall
----------------------
receive such compensation for their services hereunder as may be determined by
the Board. All expenses and liabilities incurred by members of the Plan
Administrator in connection with the administration of the Plan shall be borne
by the Company. The Plan Administrator may, at the cost of the Company, employ
attorneys, consultants, advisors, accountants, appraisers, brokers or other
Persons to provide advice, opinions or valuations, and the Plan Administrator
shall be entitled to rely upon any such advice, opinions or valuations.
ARTICLE IV
SHARES OF COMMON STOCK ISSUABLE UNDER PLAN
------------------------------------------
4.01 Maximum Number of Shares Authorized Under Plan. Option Shares which
----------------------------------------------
may be issued or granted under the Plan shall be authorized and unissued or
treasury shares of Common Stock. The aggregate maximum number of Option Shares
which may be issued shall not exceed one million (1,000,000) shares of Common
Stock.
4.02 Calculation of Number of Shares Available for Options. For purposes of
-----------------------------------------------------
calculating the maximum number of Option Shares which may be issued under the
Plan, the following rules shall apply:
A. When Options are exercised, and when cash is used as full payment
for Option Shares issuable upon exercise of such Options, all Option Shares
---
issued in connection with such exercise (including Option Shares, if any,
withheld in satisfaction of any applicable Withholding Taxes) shall be counted;
B. When Options are exercised, and when shares of Common Stock are
used as full or partial payment for Option Shares issuable upon exercise of such
Options, the net Option Shares issued in connection with such exercise
---
(including Option Shares, if any, withheld in satisfaction of any Applicable
Withholding Tax Requirements) shall be counted; and
C. If the exercise price of an Option is reduced, the transaction will
be treated as a cancellation of the Option, and the grant of a new Option.
4.03 Date of Options. The date an Option is granted shall mean the date
---------------
selected by the Plan Administrator as of which the Plan Administrator allots a
specific number of Option Shares to a Recipient with respect to such Option
pursuant to the Plan.
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<PAGE>
ARTICLE V
OPTIONS (TO PURCHASE OPTION SHARES)
-----------------------------------
5.01 Grant. The Plan Administrator may from time to time, and subject to
-----
the provisions of the Plan and such other terms and conditions as the Plan
Administrator may prescribe, grant to any Eligible Executive Officer one or more
options ("Options") to purchase the number of Option Shares allotted by the Plan
Administrator ("Option Shares"). Options shall be designated as Non-Qualified
Options or Incentive Options; provided, however, no Incentive Option shall be
granted to any Person who is not an "employee" (within the meaning of Sections
422(a)(2) and 3401(c) of the Code) of the Company and/or of any Parent and/or of
any Subsidiary. All Options shall be Non-Qualified Options unless expressly
stated by the Plan Administrator to be an Incentive Option, even if the terms
and conditions of the Option comply with the terms and conditions of Section 422
of the Code. No Incentive Option may be granted in tandem with any other
Option. The grant of an Option shall be evidenced by a written Stock Option
Certificate, executed by the Recipient and an authorized officer of the Company,
stating: (i) whether the Option is an Incentive Option, if applicable; (ii) the
number of Option Shares subject to the Option; (iii) the Option Price (as such
term is defined below) for the Option; and (iv) all other material terms and
conditions of such Option.
5.02 Option Price. The purchase price per Option Share deliverable upon the
------------
exercise of an Option (the "Option Price") shall be such price as may be
determined by the Plan Administrator; provided, however: (i) if the Option is
an Incentive Option, the Option Price per Option Share may not be less than the
Fair Market Value of a share of Common Stock as of the date of the grant, unless
the Recipient of the Option is a Ten Percent Stockholder at the time of grant,
in which case the Option Price per Option Share may not be less than one hundred
ten percent (110%) of the Fair Market Value of a share of Common Stock on the
date the Option is granted; (ii) the Option Price per Option Share shall not be
less than that allowed under the Applicable Laws; and (iii) under no
circumstances shall the Option Price per Option Share be less than the then
current par value per share of Common Stock, if applicable.
5.03 Option Term; Expiration. The term of each Option shall commence at the
-----------------------
grant date for such Option as determined by the Plan Administrator, and shall
expire (unless an earlier expiration date is expressly provided in the
underlying Stock Option Certificate or another section of the Plan including,
without limitation, section 5.05), on the first business day prior to the ten
------------
(10) year anniversary of the date of grant thereof; provided, however,
notwithstanding the foregoing, any Incentive Options granted to a Ten Percent
Stockholder shall terminate on the first business day prior to the five (5) year
anniversary of the date of grant thereof. Except as limited by the requirements
of Section 422(b)(3) of the Code in the case of Incentive Options, the Plan
Administrator may extend the term of any outstanding Option should the Plan
Administrator, in its sole and absolute discretion, determine it advisable or
necessary to do so including, without limitation, in connection with any
Termination Of Recipient.
5.04 Exercise Date. Unless a later exercise date is expressly provided in
-------------
the underlying Stock Option Certificate or another section of the Plan, each
Option shall become exercisable on the later of: (i) the date of its grant as
-----
determined by the Plan Administrator; or (ii) the date of delivery to the
Recipient, and execution by the Company and the Recipient, of the underlying
Stock Option Certificate evidencing the grant of the Option. No Option shall be
exercisable after the expiration of its applicable term as set forth in section
-------
5.03. Subject to the foregoing, each Option shall be exercisable in whole or in
- ----
part during its applicable term unless expressly provided otherwise in the
underlying Stock Option Certificate.
5.05 Vesting Conditions. Subject to the limitations in Article VII relating
------------------ -----------
to Termination Of Recipient, the Plan Administrator may subject any Options
granted to such vesting conditions as the Plan Administrator, in its sole
discretion, determines are appropriate and necessary, such as, by way of example
and not obligation, the attainment of goals by the Recipient and/or the
-12-
<PAGE>
continued provision of employment services by such Recipient to the Company
and/or to any Parent or Subsidiary. If no vesting is expressly provided in the
underlying Stock Option Certificate, the Option Shares shall be deemed fully
vested upon date of grant. Where vesting conditions are based upon continued
performance of services to the Company, the special rules of Article VII
-----------
relating to Termination Of Recipient shall apply. No vesting conditions may be
imposed which are not permitted, or exceed those permitted, under the exemption
from registration or qualification to be relied upon under applicable Securities
Laws, as selected by the Company in its sole discretion. If no vesting is
expressly provided in the underlying Stock Option Certificate, the Option Shares
shall be deemed fully vested upon date of grant. The Plan Administrator may
waive the acceleration of any vesting and/or expiration provision of any
outstanding Option should the Plan Administrator, in its sole and absolute
discretion, determine it advisable or necessary to do so including, without
limitation, in connection with any Termination Of Recipient.
5.06 Manner of Exercise. An exercisable Option, or any exercisable portion
------------------
thereof, may be exercised solely by delivery to the Secretary of the Company at
its principal executive offices prior to the time when such Option (or such
portion) becomes unexercisable under this Article V of each of the following:
---------
(i) a Notice of Exercise of Stock Option in the form attached to the underlying
Stock Option Certificate, duly signed by the Recipient or other Person then
entitled to exercise the Option or portion thereof, stating the number of Option
Shares to be purchased by exercise of the associated Option; (ii) subject to
Article VI relating to non-cash form of consideration, payment in full for the
- ----------
Option Shares to be purchased by exercise of the underlying Option, together
with payment in satisfaction of any applicable Withholding Taxes (collectively,
the "Gross Option Exercise Price"), in immediately available funds, in U.S.
dollars; provided, however, the Plan Administrator may, in its sole discretion,
permit a delay in payment of the Gross Option Exercise Price for a period of up
to thirty (30) days; (iii) a Consent of Spouse from the spouse of the Recipient,
if any, duly signed by such spouse; (iv) in the event that the Option or
portion thereof shall be exercised by any Person other than the Recipient,
appropriate proof of the right of such person or persons to exercise the Option
or portion thereof; and (v) such documents, representations and undertakings as
provided in the Stock Option Certificate and/or which the Plan Administrator,
in its absolute discretion, deems necessary or advisable pursuant to section
-------
10.01.
- -----
5.07 Net Conversion of Option. Notwithstanding section 5.06, if and to the
------------------------ ------------
extent expressly permitted in the underlying Stock Option Certificate, or if and
to the extent otherwise consented to by the Plan Administrator in writing, the
Recipient may convert an Option, in whole or in part, into such net number of
Option Shares as shall be determined by dividing (x) the difference between (I)
the aggregate Fair Market Value of the total number Option Shares to be
exercised as of the conversion date, together with payment in satisfaction of
any applicable Withholding Taxes, and (II) the aggregate Exercise Price of such
total number of Option Shares, by (y) the Fair Market Value of one Option Share
as of the date of conversion. The Recipient shall, in the event of such
permitted conversion, deliver to the Company all of the items described in
section 5.06 with respect to the underlying Option (other than section 5.06 to
- ------------ ------------
the extent payment therefore is not required by operation of this section 5.07).
------------
5.08 Grant of Replacement Options. In the event: (i) the Gross Option
----------------------------
Exercise Price is paid in the form of shares of Common Stock owned by the
Recipient pursuant to section 6.01 of Article VI; and (ii) the exercising
------------
Recipient is then an Eligible Executive Officer, then the Plan Administrator in
its sole discretion may, or the Plan Administrator (if and to the extent
expressly required by the underlying Stock Option Certificate) shall, grant to
the exercising Recipient options (the "Replacement Options") entitling the
exercising Recipient to purchase such number of Option Shares as shall equal the
number of shares of Common Stock delivered to the Company in payment of the
Gross Option Exercise Price with respect to the underlying Stock Option
Certificate. Each Replacement Option shall: (1) be immediately exercisable
upon its grant (without any vesting conditions); (2) have an Option Price for
each Option Share which equals the Fair Market Value of the
-13-
<PAGE>
Common Stock so paid as determined for purposes of payment pursuant to section
-------
6.01 of Article VI; (3) have an Option Term co-terminus with that of the
- ---- ----------
underlying Option; and (4) contain such other terms and conditions as contained
in the underlying Stock Option Certificate. Shares of Common Stock received by
the Recipient in connection with the grant of the Replacement Option may not be
used as consideration in connection with the exercise of the Replacement Option,
unless such shares of Common Stock have been held by the Recipient for a period
of at least one (1) year, and such form of payment is otherwise permitted
pursuant to the terms of Article VI. Each Replacement Option shall be a Non-
----------
Qualified Option, even if the underlying Option was an Incentive Option or the
terms and conditions of the Replacement Option would independently comply with
the terms and conditions of Section 422 of the Code. The grant of a Replacement
Option shall be evidenced by a written Stock Option Certificate, executed by the
Recipient and an authorized officer of the Company, stating: (A) the number of
Option Shares subject to the Option; (B) the Option Price (determined in the
manner prescribed above in this section) for the Option; and (C) all other
material terms and conditions of such Option.
5.09 Conditions to Issuance of Option Shares. The Company shall not be
---------------------------------------
required to issue or deliver any certificate or certificates representing the
Option Shares purchased upon exercise of any Option or any portion thereof prior
to fulfillment of all of the following conditions: (i) the delivery of the
documents described in section 5.06; (ii) the receipt by the Company of full
------------
payment for such Option Shares, together with payment in satisfaction of any
applicable Withholding Taxes; (iii) subject to Article X, the satisfaction of
---------
any requirements or conditions of the Applicable Laws; and (iv) the lapse of
such reasonable period of time following the exercise of the Option as the Plan
Administrator may establish from time-to-time for administrative convenience.
5.10 Notice of Disposition of Option Shares Acquired by Exercise of
--------------------------------------------------------------
Incentive Options. The Plan Administrator may require any Recipient who is an
- -----------------
Employee who acquires any Option Shares pursuant to the exercise of an Incentive
Option to give the Company prompt notice of any "disposition" (within the
meaning of Section 422(a)(1) of the Code) of such Option Shares within (i) two
(2) years from the date of grant of the underlying Incentive Option, or (ii) one
(1) year after the issuance of such Option Shares to such Employee, for purposes
of satisfaction of any applicable Withholding Taxes. The Plan Administrator may
direct that the certificates evidencing such Option Shares refer to such
requirement to give prompt notice.
ARTICLE VI
NON-CASH PURCHASE CONSIDERATION
-------------------------------
6.01 General. Notwithstanding section 5.06, if and to the extent expressly
------- ------------
permitted in the underlying Stock Option Certificate, or if and to the extent
otherwise consented to by the Plan Administrator in writing, payment of the
Gross Option Exercise Price may be made by one or more of the following non-cash
forms of payment in lieu of cash consideration:
A. Shares of Common Stock owned by the Recipient duly endorsed for
transfer to the Company, with a Fair Market Value on the date of delivery equal
to the aggregate Gross Option Exercise Price of the Option Shares with respect
to which the Option or portion thereof is thereby exercised;
B. The surrender or relinquishment of options, warrants or other
rights to acquire Common Stock held by the Recipient, with a Fair Market Value
on the date of delivery (or date of grant if permitted by the Plan
Administrator) equal to the aggregate Gross Option Exercise Price of the Option
Shares with respect to which the Option or portion thereof is thereby exercised;
-14-
<PAGE>
C. A reduction in the amount of any Company liability to the
Recipient, including any liability attributable to the Recipient's participation
in any Company-sponsored deferred compensation program or arrangement;
D. A full recourse promissory note bearing interest at a rate as shall
then preclude the imputation of interest under the Code, and payable upon such
terms as may be prescribed by the Plan Administrator. The Plan Administrator
shall prescribe the form of such note and the security to be given for such
note. Notwithstanding the foregoing, no Option may be exercised by delivery of a
promissory note or by a loan from the Company if such loan or other extension of
credit is prohibited by law at the time of exercise of this Option or does not
comply with the provisions of Regulation G promulgated by the Federal Reserve
Board with respect to "margin stock" if the Company and the Recipient are then
subject to such Regulation;
E. Any combination of the foregoing methods of payment; and/or
F. Such other good and valuable consideration and method of payment
for the issuance of Option Shares to the extent permitted by Applicable Laws.
ARTICLE VII
SPECIAL RULES FOR VESTING OR FORFEITURE
CONDITIONS BASED ON CONTINUED PERFORMANCE OF SERVICES
-----------------------------------------------------
7.01 Lapse of Unvested Options. Where vesting conditions are imposed upon
-------------------------
Options, and such conditions are based upon continued performance of services to
the Company, then, in the event of Termination Of Recipient, the prospective
right to purchase unvested Option Shares shall immediately lapse upon such
--------
termination if not exercised prior thereto; provided, however, the Plan
Administrator may, but without any obligation to do so, provide in the
underlying Stock Option Certificate that such unvested Options shall immediately
-----------
vest upon the occurrence of one or more of the following events as selected by
- ----
the Plan Administration in its sole and absolute discretion: (1) in the event of
Termination of Recipient where such termination is made by the Recipient and
constitutes Termination By Recipient For Good Reason; (2) in the event of
Termination of Recipient where such termination is made by the Company but does
not constitute Termination By Company For Cause; and/or (3) in the event of
Termination of Recipient due to his or her death or Disability.
7.02 Immediate Vesting of Unvested Options Upon Specified Events. The Plan
-----------------------------------------------------------
Administrator may, but without any obligation to do so, provide in the
underlying Stock Option Certificate that unvested Options shall immediately vest
----------------
upon the occurrence of one or more of the following events as selected by the
Plan Administration in its sole and absolute discretion: (i) in the event of a
Change In Control; and/or (ii) in the event of an Approved Corporate
Transaction.
7.03 Acceleration of Expiration Date - Vested Options. Where vesting
------------------------------------------------
conditions are imposed upon Options, and such conditions are based upon
continued performance of services to the Company, then, in the event of
Termination Of Recipient, unless otherwise expressly waived or extended by the
underlying Stock Option Certificate, the following rules shall apply:
A. The expiration date for vested Options shall be accelerated to
--------------- ------
thirty (30) days after the effective date of Termination Of Recipient; provided,
however, the Plan Administrator may, but without any obligation to do so,
provide in the underlying Stock Option Certificate that the expiration date for
vested Options shall not be accelerated in any event, or be accelerated to a
- ------
date later than said thirty (30) days after the effective date of Termination Of
Recipient, in any of the following events as selected by the Plan Administration
in its sole and absolute discretion: (i) in the
-15-
<PAGE>
event of Termination of Recipient where such termination is made by the
Recipient and constitutes Termination By Recipient For Good Reason; (ii) in the
event of Termination of Recipient where such termination is made by the Company
but does not constitute Termination By Company For Cause; and/or (iii) in the
event of Termination of Recipient due to his or her death or Disability.
B. The expiration date for unvested Options (insofar as they do not become
---------- ---- --------
immediately vested pursuant to section 7.02)) shall be upon Termination Of
-------------
Recipient if earlier than the expiration date specified in section 5.03.
------------
ARTICLE VIII
ASSIGNABILITY OF OPTIONS
------------------------
8.01 Exercise of Options. Options (whether vested or unvested) may be
-------------------
exercised only by the original Recipient thereof or, to the extent a Transfer is
permitted pursuant to section 8.02 and/or section 8.03 below, by a permitted
------------ ------------
transferee of such Options.
8.02 Transfer of Options. Except as provided in section 8.03 below, no
------------------- ------------
Options (whether vested or unvested) may be Transferred by a Recipient,
including upon the Death of a Recipient and/or pursuant to a Qualified Domestic
Relations Order as defined by Section 414(p) of the Code, unless (A) such
------
Transfer is expressly permitted in the underlying Stock Option Certificate, or
(B) the Plan Administrator, in its sole and absolute discretion, otherwise
consents to such Transfer in writing; provided, however, anything in the
preceding sentence to the contrary notwithstanding, the following Options may
not in any circumstances be Transferred:
A. Incentive Options, except to the extent such Transfer (if otherwise
permitted under the terms of the Stock Option Certificate or by the Plan
Administrator) will not violate Section 422(b)(5) of the Code (i.e., any
Transfer {including Transfers pursuant to Qualified Domestic Relations Orders}
other than Transfers to a deceased Recipient's successors pursuant to will or
the laws of descent or distribution by reason of the death of the Recipient);
B. Options registered under the Securities Act with the Commission on
Form S-8; and/or
C. Options granted pursuant to any other exemption from registration
or qualification to be relied upon by the Company under applicable Securities
Laws which prohibits such assignment.
8.03 Death of Recipient. Upon the death of the Recipient, vested Options
------------------ ------
may, if such Transfer is expressly permitted in the underlying Stock Option
Certificate, or if the Plan Administrator, in its sole and absolute discretion,
otherwise consents to such Transfer in writing, be Transferred to such Persons
who are the deceased Recipient's successors pursuant to will or the laws of
descent or distribution by reason of the death of the Recipient (the
"Recipient's Successors") and, in the case of vested Options, may thereafter be
------
exercised by the Recipient's Successors. Options so Transferred shall not be
further Transferred by the Recipient's Successors except to the extent the
original Recipient of such Options would have been permitted to Transfer such
Options pursuant to section 8.02.
------------
8.04 Effect of Prohibited Transfer or Exercise. Any Transfer or exercise of
-----------------------------------------
any Option so Transferred in violation of this Article VIII shall be null and
------------
void ab initio and of no further force and effect.
-16-
<PAGE>
ARTICLE IX
NO STOCKHOLDER RIGHTS
---------------------
9.01 General. The Recipient of any Option (whether vested or unvested)
-------
shall not be, nor shall such Recipient have any of the rights or privileges of,
a stockholder of the Company with respect to the Option Shares underlying the
Option including, by way of example and not limitation, the right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders, or to
receive dividends, distributions, subscription rights or otherwise, unless and
until all conditions for exercise of the Option shall be satisfied, and the
Option duly exercised and underlying Option Shares duly issued and delivered, at
which time the Recipient shall become a stockholder of the Company with respect
to such issued Option Shares and, in such capacity, shall thereafter be fully
entitled to receive dividends (if any are declared and paid), to vote, and to
exercise all other rights of a stockholder with respect to such issued Option
Shares.
ARTICLE X
COMPLIANCE WITH APPLICABLE SECURITIES LAWS
------------------------------------------
10.01 Registration or Exemption from Registration. Unless expressly
-------------------------------------------
stipulated in the underlying Stock Option Certificate, in no event shall the
Company be required at any time to register any securities issued under or
derivative from the Plan, including any Option or Option Shares awarded or
granted hereunder (collectively, the "Plan Securities"), under the Securities
Act (including, without limitation, as part of any primary or secondary
offering, or pursuant to Form S-8) or to register or qualify the Plan Securities
under any applicable Securities Laws. In the event the Company does not
register or qualify the Plan Securities, the Plan Securities shall be issued in
reliance upon such exemptions from registration or qualification under the
applicable Securities Laws that the Company and its legal counsel, in their sole
discretion, shall determine to be appropriate and necessary with respect to any
particular offer or sale of securities under the Plan including, without
limitation:
A. In the case of applicable federal Securities Laws, any of the
following if available: (1) Section 3(a)(11) of the Securities Act for
intrastate offerings and Rule 147 promulgated thereto; (2) Section 3(b) of the
Securities Act for limited offerings and Rule 701 promulgated thereto and/or
Rules 504 and/or 505 of Regulation D promulgated thereto, and/or (3) Section
4(2) of the Securities Act for private offerings and Rule 506 of Regulation D
promulgated thereto; and
B. In the case of applicable Blue Sky Laws and/or Provincial
Securities Laws (as may be applicable), the requirements of any applicable
exemptions from registration or qualification afforded by such Blue Sky Laws
and/or Provincial Securities Laws.
10.02 Failure or Inability to Obtain Regulatory Consents or Approvals. In
---------------------------------------------------------------
the event the Company is unable to obtain, without undue burden or expense, such
consents or approvals that may be required from any applicable regulatory
authority (or may be deemed reasonably necessary or advisable by legal counsel
for the Company) with respect to the applicable exemptions from registration or
qualification under the applicable Securities Laws which the Company is
reasonably relying upon, the Company shall have no obligation under this
Agreement to issue or sell the Plan Securities until such time as such consents
or approvals may be reasonably obtained without undue burden or expense, and the
Company shall be relieved of all liability therefor; provided, however, the
Company shall, if requested by the Recipient, rescind the Recipient's investment
decisions and return all funds or payments made by the Recipient to the Company
should the Company fail to obtain such consents or approvals within a reasonable
time after the Recipient tenders such funds or property to the Company.
-17-
<PAGE>
10.03 Provision of Other Documents, Including Recipient's Representative's
--------------------------------------------------------------------
Letter. If requested by the Company, the Recipient shall provide such further
- ------
representations or documents as the Company or its legal counsel, in their
reasonable discretion, deem necessary or advisable in order to effect compliance
with the conditions of any and all of the aforesaid exemptions from registration
or qualification under the applicable Securities Laws which the Company is
relying upon, or with all applicable rules and regulations of any applicable
securities exchanges or Nasdaq. If required by the Company, the Recipient shall
provide a Recipient's Representative's Letter from a purchaser representative
with credentials reasonably acceptable to the Company to the effect that such
purchaser representative has reviewed the Recipient's proposed investment in the
Plan Securities and has determined that an investment in the Plan Securities:
(i) is appropriate in light of the Recipient's financial circumstances, (ii)
that the purchaser representative and, if applicable, the Recipient, have such
knowledge and experience in financial and business matters that such persons are
capable of evaluating the merits and risks of an investment in the Plan
Securities, and (iii) that the purchaser representative and, if applicable, the
Recipient, have such business or financial experience to be reasonably assumed
to have the capacity to protect the Recipient's interests in connection with the
purchase of the Plan Securities.
10.04 Legend on Option Shares. In the event the Company delivers
-----------------------
unregistered Option Shares, the Company reserves the right to place the
following legend or such other legend as it deems necessary on the share
certificate or certificates to comply with the applicable Securities Laws being
relied upon by the Company.
The securities represented by this certificate have not been (1) registered
under the United States Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon an exemption from registration afforded by such
act, or (2) registered under the securities laws of any state or territory
of the United States or Province of Canada which may be applicable, in
reliance upon an exemption from registration afforded by such state,
territorial and/or provincial securities laws. These securities have been
acquired for the holder's own account for investment purposes and not with
a view for resale or distribution. These securities may not be sold or
transferred unless (A) they have been registered under the Securities Act
as well as under the securities laws of any state or territory of the
United States as may then be applicable, or (B) the transfer agent (or the
Company if then acting as its transfer agent) is presented with either a
written opinion satisfactory to counsel for the company or a no-action or
interpretive letter from the United States Securities And Exchange
Commission and any applicable state, territorial and/or provincial
securities regulatory agency to the effect that such registration is not
required under the circumstances of such sale or transfer.
ARTICLE XI
REPORTS TO RECIPIENTS OF AWARDS
-------------------------------
11.01 Financial Statements. The Company shall provide each Recipient with
--------------------
the Company's financial statements, in the form generally distributed to its
stockholders, at least annually.
11.02 Incentive Stock Option Reports. The Company shall provide, with
------------------------------
respect to each holder of an Incentive Option who has exercised such Incentive
Option, on or before January 31st of the year following the year of exercise of
such Incentive Option, a statement containing the following information: (i)
the Company's name, address, and taxpayer identification number; (ii) the name,
address, and taxpayer identification number of the Person to whom Option Shares
were issued by the Company upon exercise of the Incentive Option; (iii) the date
the Incentive Option was granted;
-18-
<PAGE>
(iv) the date the Option Shares underlying the Incentive Option were issued
pursuant to the exercise of the Incentive Option; (v) the Fair Market Value of
the Option Shares on date of exercise; (vi) the number of Option Shares issued
upon exercise of the Incentive Option; (vii) a statement that the Incentive
Option was an incentive stock option; and (viii) the total cost of the Option
Shares.
ARTICLE XII
ADJUSTMENTS
-----------
12.01 Common Stock Recapitalization or Reclassification; Combination or
-----------------------------------------------------------------
Reverse Stock Split; Forward Stock Split. If (i) outstanding shares of Common
- ----------------------------------------
Stock are subdivided into a greater number of shares by reason of
recapitalization or reclassification, (ii) a dividend in Common Stock shall be
paid or distributed in respect of the Common Stock, then the number of Option
Shares, if any, available for issuance under the Plan, and the Option Price of
any outstanding Options in effect immediately prior to such subdivision or at
the record date of such dividend shall, simultaneously with the effectiveness of
such subdivision or immediately after the record date of such dividend, be
proportionately increased and reduced, respectively. If outstanding shares of
Common Stock are combined into a lesser number of shares by reason of
combination or reverse stock split, then the number of Option Shares, if any,
available for issuance under the Plan, and the Option Price of any outstanding
Option in effect immediately prior to such combination shall, simultaneously
with the effectiveness of such combination, be proportionately reduced and
increased, respectively.
12.02 Consolidation or Merger; Exchange of Securities; Divisive
---------------------------------------------------------
Reorganization; Other Reorganization or Reclassification. In case of (i) the
- --------------------------------------------------------
consolidation, merger, combination or exchange of shares of capital stock with
another entity, (ii) the divisive reorganization of the Company (i.e., split-up,
spin-off or split-off), or (iii) any capital reorganization or any
reclassification of Common Stock (other than a recapitalization or
reclassification described above in section 12.01), the Recipient shall
-------------
thereafter be entitled upon exercise of the Option to purchase the kind and
number of shares of capital stock or other securities or property of the Company
(or its successor{s}) receivable upon such event by a Recipient of the number of
Option Shares which such Option entitles the Recipient to purchase from the
Company immediately prior to such event. In every such case, the Company may
appropriately adjust the number of Option Shares which may be issued under the
Plan, the number of Option Shares subject to Options theretofore granted under
the Plan, the Option Price of Options theretofore granted under the Plan, and
any and all other matters deemed appropriate by the Plan Administrator.
12.03 Adjustments Determined in Sole Discretion of Board. All adjustments
--------------------------------------------------
to be made pursuant to the foregoing subsections shall be made in such manner as
the Plan Administrator shall deem equitable and appropriate, the determination
of the Plan Administrator shall be final, binding and conclusive.
12.04 No Other Rights to Recipient. Except as expressly provided in this
----------------------------
Article XII: (i) the Recipient shall have no rights by reason of any
- -----------
subdivision or consolidation of shares of capital stock of any class or the
payment of any stock dividend or any other increase or decrease in the number of
shares of stock of any class, and (ii) the dissolution, liquidation, merger,
consolidation or divisive reorganization or sale of assets or stock to another
corporation (including any Approved Corporate Transactions), or any issue by the
Company of shares of capital stock of any class, or warrants or options or
rights to purchase securities (including securities convertible into shares of
capital stock of any class), shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of, or the Option Price for,
the Option Shares. The grant of an Option pursuant to the Plan shall not in any
way affect or impede the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
-19-
<PAGE>
ARTICLE XIII
APPROVED CORPORATE TRANSACTIONS -- AFFECT ON OPTIONS
----------------------------------------------------
13.01 General. Notwithstanding Article XII above, in the event of the
------- -----------
occurrence of any Approved Corporate Transaction, or in the event of any change
in applicable laws, regulations or accounting principles, the Plan Administrator
in its discretion is hereby authorized to take any one or more of the following
actions whenever the Plan Administrator determines that such action is
appropriate in order to facilitate such Approved Corporate Transactions or to
give effect to changes in laws, regulations or principles:
A. Purchase or Replacement of Option. In its sole and absolute
---------------------------------
discretion, and on such terms and conditions as it deems appropriate, the Plan
Administrator may provide, either by the terms of the underlying Stock Option
Certificate or by action taken prior to the occurrence of such transaction or
event and either automatically or upon the Recipient's request, for any one or
combination of the following: (1) the purchase of any such Option for an amount
of cash equal to the amount that could have been attained upon the exercise of
such Option, or realization of the Recipient's rights had such Option been
currently exercisable or payable or fully vested; and/or (ii) the replacement of
such Option with other rights or property (which may or may not be securities)
selected by the Plan Administrator in its sole discretion.
B. Acceleration of Vesting and Exercise. In its sole and absolute
------------------------------------
discretion, and on such terms and conditions as it deems appropriate, the Plan
Administrator may provide, either by the terms of the underlying Stock Option
Certificate or by action taken prior to the occurrence of such transaction or
event, that such Option may not be exercised after the occurrence of such event;
provided, however, the Recipient must be given the opportunity, for a specified
period of time prior to the consummation of such transaction, to exercise the
Option as to all Option Shares (i.e., both fully vested and unvested) covered
thereby.
C. Assumption or Substitution. In its sole and absolute discretion,
--------------------------
and on such terms and conditions as it deems appropriate, the Plan Administrator
may provide, either by the terms of the underlying Stock Option Certificate or
by action taken prior to the occurrence of such transaction or event, that such
Option be assumed by the successor or survivor corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar options covering the
capital stock of the successor or survivor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices.
ARTICLE XIV
CERTAIN TRANSACTIONS WITHOUT CHANGE IN
BENEFICIAL OWNERSHIP -- AFFECT ON OPTIONS
------------------------------------------
14.01 General. Notwithstanding Article XII above, in the event of a
------- -----------
transaction whose principal purpose is to change the State in which the Company
is incorporated, or to form a holding company, or to effect a similar
reorganization as to form of entity without change of beneficial ownership,
including, without limitation, through: (i) a merger or consolidation or stock
exchange or divisive reorganization (i.e., spin-off, split-off or split-up) or
other reorganization with respect to the Company and/or its stockholders, or
(ii) the sale, transfer, exchange or other disposition by the Company of its
assets in a single or series of related transactions, then the Plan
Administrator may provide, in its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, either by the terms of the
underlying Stock Option Certificate or by action taken prior to the
-20-
<PAGE>
occurrence of such transaction or event, that such Option shall be assumed by
the successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options covering the capital stock of the
successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices.
ARTICLE XV
DRAG-ALONG RIGHTS
-----------------
15.01 General. In the event the Board and, to the extent required by law,
-------
the stockholders of the Company, approve the sale, transfer, exchange or other
disposition of fifty percent (50%) or more of the capital stock of the Company
in a single or series of related transactions (an "Approved Stock Sale
Transaction"), the Company shall have the right (the "Drag-Along Right") to
require the Recipient and/or his, her or its permitted successors, to sell,
transfer, exchange or otherwise dispose of any Plan Shares held by such Persons
as part of such Approved Stock Sale Transaction, notwithstanding that such
Persons did not approve of such Approved Stock Sale Transaction and/or did not
otherwise consent to the sale, transfer, exchange or other disposition of their
Plan Shares in accordance with the terms of such Approved Stock Sale
Transaction; provided, however, in the event less than all of the shares of
Common Stock are to be sold, transferred, exchanged or otherwise disposed as
part of the Approved Stock Sale Transaction, the Recipient and/or his, her or
its permitted successors will not be required to sell, transfer, exchange or
otherwise dispose of a number of Plan Shares which exceeds the aggregate number
of Plan Shares held by such Person multiplied by a fraction, the numerator of
which is the number of Plan Shares held by such Persons and the denominator of
which is the total number of share of Common Stock then issued and outstanding.
15.02 Legend on Shares. To facilitate compliance with the terms of this
----------------
Article XV, the Company shall have the right to place the following legend on
- ----------
the certificates representing the Plan Shares:
"The securities represented by this certificate are subject to certain
drag-along rights set forth in full in that certain 1999 Clean Energy
Technologies, Inc. stock plan dated March 5, 1999, as it may be amended or
restated from time to time, a copy of which may be inspected by authorized
persons at the principal office of the company, and all the provisions of
which are incorporated by reference in this certificate."
15.03 Escrow; Irrevocable Power Of Attorney. For purposes of facilitating
-------------------------------------
the obligation to transfer set forth in this Article XV, the Company, in its
----------
sole discretion, may require each Recipient and/or his, her or its permitted
successors, at the Company's cost, to deliver the share certificate(s)
representing the Plan Shares held by such Recipient and/or his, her or its
permitted successors (the "Stock Certificate") with a stock power executed by
such Recipient and/or his, her or its permitted successors in blank, to the
Secretary of the Company or the Company's designee, to hold the Stock
Certificate and stock power in escrow and to take all such actions and to
effectuate all such transfers or releases as are in accordance with the terms of
this Article XV. The Stock Certificate may be held in escrow so long as the
----------
Plan Shares represented by the Stock Certificate are subject to the terms of
this Article XV. The Recipient and/or his, her or its permitted successors each
----------
hereby irrevocably constitutes and appoints the Secretary of the Company, with
full power of substitution, as the true and lawful attorney to act as escrow
holder for such Persons under this Article XV, and any amendments to it. The
----------
power of attorney hereby granted is irrevocable and shall be deemed to be
coupled with an interest, and it shall survive death, disability, dissolution or
termination of the Recipient and/or his, her or its permitted successors. The
escrow holder will not be liable to any party for any act or omission unless the
escrow holder is grossly negligent in performing such act or omission. The
escrow holder may rely upon any letter, notice or other document executed by any
signature purported to be genuine.
-21-
<PAGE>
ARTICLE XVI
AMENDMENT AND DISCONTINUATION OF PLAN; MODIFICATION OF AWARDS
-------------------------------------------------------------
16.01 Amendment, Modification or Termination of Plan. The Board may amend
----------------------------------------------
or modify the Plan or suspend or discontinue the Plan at any time or from time-
to-time; provided, however, (i) no such action may adversely alter or impair any
Option previously granted under the Plan without the consent of each Recipient
affected thereby, and (ii) no action of the Board will cause Incentive Options
granted under the Plan not to comply with Section 422 of the Code unless the
Board specifically declares such action to be made for that purpose.
16.02 Modification of Terms of Outstanding Options. Subject to the terms
--------------------------------------------
and conditions and within the limitations of the Plan, the Plan Administrator
may modify the terms and conditions of any outstanding Options granted under the
Plan, including extending the expiration date of such Options or renewing such
Options or repricing such options or modifying any vesting conditions (but only,
in the case of Incentive Options, to the extent permitted under Section 422 of
the Code), or accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
therefor (to the extent not theretofore exercised); provided, however, no
modification of any outstanding Option may, without the consent of the Recipient
affected thereby, adversely alter or impair such Recipient's rights under such
Option.
16.03 Compliance with Laws. The Plan Administrator may, at any time or from
--------------------
time-to-time, without receiving further consideration from, or paying any
consideration to, any Person who may become entitled to receive or who has
received the grant of an Option hereunder, modify or amend Options granted under
the Plan as required to: (i) comport with changes in securities, tax or other
laws or rules, regulations or regulatory interpretations thereof applicable to
the Plan or Options thereunder or to comply with the rules or requirements of
any stock exchange or Nasdaq and/or (ii) ensure that the Plan is and remains
exempt from the application of any participation, vesting, benefit accrual,
funding, fiduciary, reporting, disclosure, administration or enforcement
requirement of either the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the corresponding provisions of the Internal Revenue Code
of 1986, as amended (Subchapter D of Title A, Chapter 1 of the Code
{encompassing Sections 400 to 420 of the Code}).
ARTICLE XVII
MISCELLANEOUS
-------------
17.01 Performance on Business Day. In the event the date on which a party
---------------------------
to the Plan is required to take any action under the terms of the Plan is not a
business day, the action shall, unless otherwise provided herein, be deemed to
be required to be taken on the next succeeding business day.
17.02 Employment Status. In no event shall the granting of an Option be
-----------------
construed to: (i) grant a continued right of employment to a Recipient if such
Person is employed by the Company and/or by the Parent and/or any Subsidiary, or
(ii) affect, restrict or interfere with in any way any right the Company and/or
Parent and/or any Subsidiary may have to terminate or otherwise discharge the
employment and/or engagement of such Person, at any time, with or without cause,
except to the extent that such Person and the Company and/or Parent and/or any
Subsidiary may have otherwise expressly agreed in writing. Unless otherwise
expressly agreed in writing, the application and/or construction of the terms
Termination By Company For Cause, Termination By Recipient For Good Reason and
Termination Of Recipient are solely intended for, and shall be limited to, the
operation of the vesting and expiration provisions of Options granted under this
Plan, and governing Stock Option Certificates, and not for any other purpose.
-22-
<PAGE>
17.03 Non-Liability For Debts; Restrictions Against Transfer. No Options
------------------------------------------------------
granted hereunder, or any part thereof, (i) shall be liable for the debts,
contracts, or engagements of a Recipient, or such Recipient's successors in
interest as permitted under this Plan, or (ii) shall be subject to disposition
by transfer, alienation, or any other means whether such disposition be
voluntary or involuntary or by operation of law, by judgment, levy, attachment,
garnishment, or any other legal or equitable proceeding (including bankruptcy),
and any attempted disposition thereof shall be null and void ab initio and of no
further force and effect.
17.04 Relationship Of Plan To Other Options And Compensation Plans. The
------------------------------------------------------------
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Parent or Subsidiary. Nothing in this Plan
shall be construed to limit the right of the Company to: (i) establish any
other forms of incentives or compensation for Employees of the Company and/or of
any Parent and/or any Subsidiary; or (ii) to grant options to purchase shares of
Common Stock or to award shares of Common Stock or grant any other securities or
rights otherwise under this Plan in connection with any proper corporate purpose
including but not by way of limitation, in connection with the acquisition by
purchase, lease, merger, consolidation or otherwise, of the business, stock or
assets of any corporation, partnership, firm or association.
17.05 Severability. If any term or provision of this Plan or the
------------
application thereof to any person or circumstance shall, to any extent, be
determined to be invalid, illegal or unenforceable under present or future laws,
then, and in that event: (i) the performance of the offending term or provision
(but only to the extent its application is invalid, illegal or unenforceable)
shall be excused as if it had never been incorporated into this Plan, and, in
lieu of such excused provision, there shall be added a provision as similar in
terms and amount to such excused provision as may be possible and be legal,
valid and enforceable; and (ii) the remaining part of this Plan (including the
application of the offending term or provision to persons or circumstances other
than those as to which it is held invalid, illegal or unenforceable) shall not
be affected thereby, and shall continue in full force and effect to the fullest
extent provided by law.
17.06 Headings; References; Incorporation; Gender; Statutory References.
-----------------------------------------------------------------
The headings used in this Plan are for convenience and reference purposes only,
and shall not be used in construing or interpreting the scope or intent of this
Plan or any provision hereof. References to this Plan shall include all
amendments or renewals thereof. All cross-references in this Plan, unless
specifically directed to another agreement or document, shall be construed only
to refer to provisions within this Plan, and shall not be construed to be
referenced to the overall transaction or to any other agreement or document.
Any Exhibit referenced in Plan shall be construed to be incorporated in this
Plan by such reference. As used in this Plan, each gender shall be deemed to
include the other gender, including neutral genders appropriate for entities, if
applicable, and the singular shall be deemed to include the plural, and vice
versa, as the context requires. Any reference to statutes or laws will include
all amendments, modifications, or replacements of the specific sections and
provisions concerned.
17.07 Applicable Law. This Plan and the rights and remedies of each party
--------------
arising out of or relating to this Plan (including, without limitation,
equitable remedies) shall (with the exception of the Securities Laws) be solely
governed by, interpreted under, and construed and enforced in accordance with
the laws (without regard to the conflicts of law principles) of the State of
Nevada, as if this Plan were made, and as if its obligations are to be
performed, wholly within the State of Nevada.
-23-
<PAGE>
EXHIBIT 4.6
================================================================================
STOCK OPTION CERTIFICATE
1999 Pinnacle Oil International, INC. EXECUTIVE STOCK OPTION PLAN
-----------------------------------------------------------------
[To be prepared by the Company and signed by the Recipient]
================================================================================
<TABLE>
<S> <C> <C>
Name of Recipient.........................
Capacity of Recipient..................... Executive Officer
Legal Address/Domicile of Recipient.......
Citizenship of Recipient.................. [_] United States [_] Canada
[_] Other:
-------------------------------------
Number of Option Shares................... ______________
Option Price per Option Share............. ______________
Classification of Option.................. [_] Non-Qualified Option [_] Incentive Option
Vesting................................... [_] Fully Vested
[_] Continuous Service Vesting (see sections 2 through 4 below)
Continuous Services Vesting Date: ______________
Option Expiration Date.................... ______________ (subject to section 4 below)
Option Effective Date..................... ______________
U.S. Federal Exemption To Be Relied
Upon at the Time of Exercise............
Blue Sky Exemption Relied Upon............
</TABLE>
================================================================================
The securities offered hereby have not been registered with, or approved or
disapproved by, the United States Securities and Exchange Commission or any
state, territorial or provincial securities regulatory agency, including the
Alberta Securities Commission, nor has the Securities and Exchange Commission or
any state, territorial or provincial securities regulatory agency, including the
Alberta Securities Commission, reviewed or passed upon or endorsed the merits of
the offering contemplated by this Stock Option Certificate or the accuracy or
adequacy of any offering materials, including the 1999 Pinnacle Oil
International, Inc. Executive Stock Option Plan or the Plan Summary for such
Executive Stock Option Plan. Any representation to the contrary is a criminal
offense. These securities are speculative and involve a high degree of risk and
substantial and immediate dilution. There is a limited public market for the
sale of these securities by the recipient. These securities may not be sold or
transferred unless registered, or the recipient provides the company an opinion
of counsel satisfactory to the Company, or its legal counsel, that such
registration is not required by reason of an exemption or otherwise. As a
result, these securities are suitable only for certain sophisticated and
qualified investors who can bear the financial risk of an investment in these
securities for an indefinite period of time.
================================================================================
<PAGE>
No 0__
================================================================================
THIS STOCK OPTION CERTIFICATE is entered into between Pinnacle Oil
International, Inc., a Nevada corporation (the "Company"), whose principal
executive office is located at 840 7th Avenue, Suite 750, Phoenix Place, S.W.,
Calgary, Alberta, Canada, T2P 3G2, and the Recipient identified on the first
page of this Stock Option Certificate (the "Recipient"), pursuant to that
certain 1999 Pinnacle Oil International, Inc. Executive Stock Option Plan dated
April 27, 1999, as such Plan may be amended and/or restated from time to time
(the "Plan"). Subject to the terms of this Stock Option Certificate, the
Recipient's rights to purchase the Option Shares are governed by the Plan, the
terms of which are incorporated herein by this reference. Defined terms in this
Stock Option Certificate shall have the same meaning as defined terms in the
Plan.
1. GRANT OF OPTION
This Stock Option Certificate certifies that the Company has granted to the
Recipient, pursuant to the terms of the Plan, a stock option (the "Option")
to purchase, in whole or in part, the number of Option Shares designated on
the first page of this Stock Option Certificate (collectively and
severally, the "Option Shares"), representing shares of the common stock,
par value $0.001 (the "Common Stock") of the Company, at the exercise or
Option Price per Option Share designated on the first page of this Stock
Option Certificate (the "Option Price"), subject to the following terms and
conditions.
2. CONTINUOUS SERVICE VESTING
If the Option Shares are subject to vesting by reason of the Continuous
Service Vesting designation set forth on the first page of this Stock
Option Certificate, then, subject to section 5.05 of the Plan, the Option
------------
Shares are subject to vesting based upon continued performance of services
in the capacity set forth on the first page of this Stock Option
Certificate through the Continuous Service Vesting Date (as such date is
defined on the first page of this Stock Option Certificate), subject,
however, to the following:
(a) Death or Disability. In the event of the death or Disability of the
-------------------
Recipient (as such latter term is defined in the Recipient's
Employment Agreement), all unvested Options Shares which would have
--------
vested within the twelve (12) month period following the date of death
or Disability will vest effective as of the date of death or
Disability, and the prospective right to purchase the balance of the
remaining unvested Option Shares shall lapse.
--------
(b) Termination By Company For Cause Or By Recipient Without Good Reason.
--------------------------------------------------------------------
In the event the Recipient's employment with the Company is
terminated, and such termination is attributable to (i) an event
defined as Termination By Company for Cause (as such term is defined
in the Recipient's Employment Agreement); and/or (ii) termination by
the Recipient which does not constitute Termination By Executive For
---
Good Reason (as such term is defined in the Recipient's Employment
Agreement); then the prospective right to purchase unvested Option
--------
Shares shall lapse to the extent such rights do not vest prior to the
effective date of termination.
(c) Termination By Company Without Cause Or By Recipient With Good Reason;
----------------------------------------------------------------------
Change Of Control. In the event the Recipient's employment with the
-----------------
Company is terminated, and such termination is attributable to (i) an
event defined as a Termination by Executive for Good Reason (as such
term is defined in the Recipient's Employment Agreement); (ii)
termination by the Company which does not constitute a Termination By
Company for Cause (as such term is defined in the Recipient's
Employment Agreement) and/or (iii) an event defined as a Change in
Control (as such term is defined in the Recipient's Employment
Agreement); then the prospective right to purchase unvested Option
--------
Shares shall vest as of the effective date of termination.
-2-
<PAGE>
No. 0__
================================================================================
3. CONTINUOUS SERVICE VESTING -- ACCELERATION OF VESTING IN THE EVENT OF
TERMINATION OF RECIPIENT
If the Option Shares are subject to vesting by reason of the Continuous
Service Vesting designation set forth on the first page of this Stock
Option Certificate, then the prospective right to purchase unvested Option
--------
Shares shall, subject to the vesting provisions of section 2 of this Stock
---------
Option Certificate, immediately lapse if such right does not vest prior to
Termination Of Recipient.
4. TERM OF OPTION
The right to exercise the Options granted by this Stock Option Certificate
shall commence on the Option Effective Date designated on the first page of
this Stock Option Certificate, and shall expire and be null and void ab
initio and of no further force or effect to the extent not exercised by 5:00
p.m. M.S.T., on the Option Expiration Date designated on the first page of
this Stock Option Certificate (the "Option Expiration Date"); provided,
however, if the Option Shares are subject to the Continuous Service Vesting
designation set forth on the first page of this Stock Option Certificate,
then, pursuant to section 5.05 of the Plan but subject to the vesting
------------
provisions of section 2 of this Stock Option Certificate, in the event of
---------
Termination Of Recipient, the expiration date shall be accelerated to two
(2) years after the effective date of Termination Of Recipient (if earlier
than the Option Expiration Date).
5. DELIVERIES; MANNER OF EXERCISE AND PAYMENT
This Option shall be exercised by delivery of the following to the
Secretary of the Company at the Company's principal executive offices: (i)
this Stock Option Certificate, duly signed by the Recipient; (ii) full
payment for the Option Shares to be purchased in (1) immediately available
funds (in U.S. dollars); (2) if then employed by the Company, shares of
Common Stock pursuant to section 5.06A of the Plan; (3) if then employed by
-------------
the Company, surrender or relinquishment of rights to acquire Common Stock
pursuant to section 5.06B of the Plan; (4) if and to the extent consented
-------------
to by the Board, a promissory note pursuant to section 5.06D of the Plan;
-------------
and/or (5) if and to the extent consented to by the Board, other property
constituting good and valuable consideration pursuant to section 5.06F of
-------------
the Plan; and (iii) a Consent of Spouse (as such consent is defined in the
Plan) from the spouse of the Recipient, if any, duly signed by such spouse.
6. EXERCISE AND TRANSFER OF OPTION
Options may only be exercised by the original Recipient hereof, and may not
be Transferred by such Recipient, except upon and following the Death of a
Recipient (if a natural person), but only to the Recipient's Successors as
provided in sections 8.02 and 8.03 of the Plan. Any Transfer or exercise
------------- ----
of an Option so Transferred in violation of this Stock Option Certificate
shall be null and void ab initio and of no further force and effect.
7. MISCELLANEOUS
(a) Preparation of Stock Option Certificate; Costs and Expenses. This Stock
-----------------------------------------------------------
Option Certificate was prepared by the Company solely on behalf of the
Company. Each party acknowledges that: (i) he, she or it had the advice
of, or sufficient opportunity to obtain the advice of, legal counsel
separate and independent of legal counsel for any other party hereto;
(ii) the terms of the transaction contemplated by this Stock Option
Certificate are fair and reasonable to such party; and (iii) such party
has voluntarily entered into the transaction contemplated by this Stock
Option Certificate without duress or coercion. Each party further
acknowledges such party was not represented by the legal counsel of any
other party hereto in connection with the transaction contemplated by
this Stock Option Certificate, nor was such party under any belief or
understanding that such legal counsel was representing his, her or its
interests. Except as
-3-
<PAGE>
No.0__
================================================================================
expressly set forth in this Stock Option Certificate, each party shall
pay all legal and other costs and expenses incurred or to be incurred
by such party in negotiating and preparing this Stock Option
Certificate; in performing due diligence or retaining professional
advisors; in performing any transactions contemplated by this Stock
Option Certificate; or in complying with such party's covenants,
agreements and conditions contained herein. Each party agrees that no
conflict, omission or ambiguity in this Stock Option Certificate, the
Plan and/or the Plan Summary or the interpretation thereof, shall be
presumed, implied or otherwise construed against the Company or any
other party to this Stock Option Certificate on the basis that such
party was responsible for drafting this Stock Option Certificate.
(b) Cooperation. Each party agrees, without further consideration, to
-----------
cooperate and diligently perform any further acts, deeds and things,
and to execute and deliver any documents that may be reasonably
necessary or otherwise reasonably required to consummate, evidence,
confirm and/or carry out the intent and provisions of this Stock Option
Certificate, all without undue delay or expense.
(c) Interpretation.
--------------
(i) Survival. All representations and warranties made by any party in
--------
connection with any transaction contemplated by this Stock Option
Certificate shall, irrespective of any investigation made by or on
behalf of any other party hereto, survive the execution and
delivery of this Stock Option Certificate and the performance or
consummation of any transaction described in this Stock Option
Certificate.
(ii) Entire Agreement/No Collateral Representations. Each party
----------------------------------------------
expressly acknowledges and agrees that this Stock Option
Certificate, together with and subject to the Plan and the Plan
Summary: (1) is the final, complete and exclusive statement of the
agreement of the parties with respect to the subject matter
hereof; (2) supersedes any prior or contemporaneous agreements,
proposals, commitments, guarantees, assurances, communications,
discussions, promises, representations, understandings, conduct,
acts, courses of dealing, warranties, interpretations or terms of
any kind, whether oral or written (collectively and severally, the
"prior agreements"), and that any such prior agreements are of no
force or effect except as expressly set forth herein; and (3) may
not be varied, supplemented or contradicted by evidence of prior
agreements, or by evidence of subsequent oral agreements. No prior
drafts of this Stock Option Certificate, and no words or phrases
from any prior drafts, shall be admissible into evidence in any
action or suit involving this Stock Option Certificate.
(iii) Amendment; Waiver; Forbearance. Except as expressly provided
------------------------------
otherwise herein, neither this Stock Option Certificate nor any
of the terms, provisions, obligations or rights contained herein
may be amended, modified, supplemented, augmented, rescinded,
discharged or terminated (other than by performance), except as
provided in the Plan or by a written instrument or instruments
signed by all of the parties to this Stock Option Certificate. No
waiver of any breach of any term, provision or agreement
contained herein, or of the performance of any act or obligation
under this Stock Option Certificate, or of any extension of time
for performance of any such act or obligation, or of any right
granted under this Stock Option Certificate, shall be effective
and binding unless such waiver shall be in a written instrument
or instruments signed by each party claimed to have given or
consented to such waiver and each party affected by such waiver.
Except to the extent that the party or parties claimed to have
given or consented to a waiver may have otherwise agreed in
writing, no such waiver shall be deemed a waiver or
relinquishment of any other term, provision, agreement, act,
obligation or right granted under this Stock Option Certificate,
or any preceding or subsequent breach thereof. No forbearance by
a party to seek a remedy for any noncompliance or breach by
another
-4-
<PAGE>
No.0__
================================================================================
party hereto shall be deemed to be a waiver by such forbearing
party of its rights and remedies with respect to such
noncompliance or breach, unless such waiver shall be in a written
instrument or instruments signed by the forbearing party.
(iv) Remedies Cumulative. The remedies of each party under this Stock
-------------------
Option Certificate are cumulative and shall not exclude any other
remedies to which such party may be lawfully entitled, at law or
in equity.
(v) Severability. If any term or provision of this Stock Option
------------
Certificate or the application thereof to any person or
circumstance shall, to any extent, be determined to be invalid,
illegal or unenforceable under present or future laws, then, and
in that event: (1) the performance of the offending term or
provision (but only to the extent its application is invalid,
illegal or unenforceable) shall be excused as if it had never
been incorporated into this Stock Option Certificate, and, in
lieu of such excused provision, there shall be added a provision
as similar in terms and amount to such excused provision as may
be possible and be legal, valid and enforceable; and (2) the
remaining part of this Stock Option Certificate (including the
application of the offending term or provision to persons or
circumstances other than those as to which it is held invalid,
illegal or unenforceable) shall not be affected thereby, and
shall continue in full force and effect to the fullest extent
provided by law.
(vi) Parties in Interest. Notwithstanding anything else to the
-------------------
contrary herein, nothing in this Stock Option Certificate shall
confer any rights or remedies under or by reason of this Stock
Option Certificate on any persons other than the parties hereto
and their respective successors and assigns, if any, as may be
permitted under the Plan or hereunder, nor shall anything in this
Stock Option Certificate relieve or discharge the obligation or
liability of any third person to any party to this Stock Option
Certificate, nor shall any provision give any third person any
right of subrogation or action over or against any party to this
Stock Option Certificate.
(vii) No Reliance Upon Prior Representation. Each party acknowledges
-------------------------------------
that: (i) no other party has made any oral representation or
promise which would induce them prior to executing this Stock
Option Certificate to change their position to their detriment,
to partially perform, or to part with value in reliance upon such
representation or promise; and (ii) such party has not so changed
its position, performed or parted with value prior to the time of
the execution of this Stock Option Certificate, or such party has
taken such action at its own risk.
(viii) Headings; References; Incorporation; "Person"; Gender; Statutory
----------------------------------------------------------------
References. The headings used in this Stock Option Certificate
----------
are for convenience and reference purposes only, and shall not be
used in construing or interpreting the scope or intent of this
Stock Option Certificate or any provision hereof. References to
this Stock Option Certificate shall include all amendments or
renewals thereof. All cross-references in this Stock Option
Certificate, unless specifically directed to another agreement or
document, shall be construed only to refer to provisions within
this Stock Option Certificate, and shall not be construed to be
referenced to the overall transaction or to any other agreement
or document. Any Exhibit referenced in this Stock Option
Certificate shall be construed to be incorporated in this Stock
Option Certificate by such reference. As used in this Stock
Option Certificate, the term "person" is defined in its broadest
sense as any individual, entity or fiduciary who has legal
standing to enter into this Stock Option Certificate such as, by
way of example and not limitation, individual or natural persons
and trusts. As used in this Stock Option Certificate, each gender
shall be deemed to include the other gender, including neutral
genders appropriate for entities, if applicable, and the singular
shall be deemed to include the plural, and vice versa, as the
context requires. Any
-5-
<PAGE>
No.0__
================================================================================
reference to statutes or laws will include all amendments,
modifications, or replacements of the specific sections and
provisions concerned.
(d) Enforcement.
-----------
(i) Applicable Law. This Stock Option Certificate and the rights and
--------------
remedies of each party arising out of or relating to this Stock
Option Certificate (including, without limitation, equitable
remedies) shall (with the exception of the Securities Act and the
Blue Sky Laws) be solely governed by, interpreted under, and
construed and enforced in accordance with the laws (without regard
to the conflicts of law principles) of the Province of Alberta,
Canada, as if this Stock Option Certificate were made, and as if
its obligations are to be performed, wholly within the Province of
Alberta, Canada.
(ii) Consent to Jurisdiction; Service of Process. Any "action or
-------------------------------------------
proceeding" (as such term is defined below) arising out of or
relating to this Stock Option Certificate shall be filed in and
heard and litigated solely before the provincial courts of
Alberta, Canada, located within the City of Calgary, Alberta,
Canada. Each party generally and unconditionally accepts the
exclusive jurisdiction of such courts and venue therein; consents
to the service of process in any such action or proceeding by
certified or registered mailing of the summons and complaint in
accordance with the notice provisions of this Stock Option
Certificate; and waives any defense or right to object to venue in
said courts based upon the doctrine of "forum non conveniens." The
term "action or proceeding" is defined as any and all claims,
suits, actions, hearings, arbitrations or other similar
proceedings, including appeals and petitions therefrom, whether
formal or informal, governmental or non-governmental, or civil or
criminal.
(iii) Waiver of Right to Jury Trial. Each party hereby waives such
-----------------------------
party's respective right to a jury trial of any claim or cause of
action based upon or arising out of this Stock Option Certificate.
Each party acknowledges that this waiver is a material inducement
to each other party hereto to enter into the transaction
contemplated hereby; that each other party has already relied upon
this waiver in entering into this Stock Option Certificate; and
that each other party will continue to rely on this waiver in
their future dealings. Each party warrants and represents that
such party has reviewed this waiver with such party's legal
counsel, and that such party has knowingly and voluntarily waived
its jury trial rights following consultation with such legal
counsel.
(e) Successors and Assigns. All of the representations, warranties,
----------------------
covenants, conditions and provisions of this Stock Option Certificate
shall be binding upon and shall inure to the benefit of each party and
such party's respective successors and permitted assigns, spouses,
heirs, executors, administrators, and personal and legal
representatives.
(f) Notices. Except as otherwise specifically provided in this Stock Option
-------
Certificate, all notices, demands, requests, consents, approvals or
other communications (collectively and severally called "notices")
required or permitted to be given hereunder shall be given in accordance
with the notice provisions in the Plan.
(g) Counterparts. This Stock Option Certificate may be executed in
------------
counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument, binding on
all parties hereto. Any signature page of this Stock Option Certificate
may be detached from any counterpart of this Stock Option Certificate
and reattached to any other counterpart of this Stock Option Certificate
identical in form hereto by having attached to it one or more additional
signature pages.
-6-
<PAGE>
NO.0__
================================================================================
WHEREFORE, the parties hereto have for purposes of this Stock Option Certificate
executed this Stock Option Certificate in Calgary, Alberta, Canada, effective as
of the Option Effective Date first set forth on the first page of this Stock
Option Certificate.
COMPANY:
Pinnacle Oil International, Inc.,
a Nevada corporation
By:
----------------------------
RECIPIENT:
- -------------------------------
-7-
<PAGE>
No.0__
================================================================================
Attachment to Stock Option Certificate
NOTICE OF EXERCISE OF STOCK OPTION
----------------------------------
[To be signed by the Recipient only upon exercise of Option]
TO: Secretary
Pinnacle Oil International, Inc.
840 7th Avenue, Suite 750, Phoenix Place, S.W.
Calgary, Alberta, Canada T2P 3G2
The undersigned, the holder of Options under that certain Stock Option
Certificate (the "Option Certificate") dated effective ____________ between
Pinnacle Oil International, Inc., a Nevada corporation (the "Company") and the
undersigned (the "Recipient"), hereby irrevocably elects, in accordance with the
terms and conditions of that certain 1999 Pinnacle Oil International, Inc.
Executive Stock Option Plan dated April 27, 1999, as it may be amended from time
to time (the "Plan"), under which the Stock Option Certificate was granted, to
exercise the undersigned's Option under the Plan to purchase
(______________)(1) shares of the common stock, no par value ("Common Stock") of
the Company (collectively and severally, the "Option Shares"), for the aggregate
purchase price of ($______________).(2).
(1) Insert number of Option Shares as specified in the Stock Option
Certificate which are vested Option Shares (as defined by the Plan)
which the Recipient is exercising the Recipient's Option to purchase.
(2) Number of Option Shares to be exercised as specified above multiplied
by the Option Price per share ($_______ per share).
The Recipient hereby makes the following acknowledgments to the Company:
A. That the Company shall have the right, if the Recipient is an Employee as of
the date of his, her or its exercise of the Option, to withhold from the
Recipient's compensation such amounts as may be sufficient to satisfy any
federal, state, territorial and/or provincial withholding tax requirements
incident to such exercise pursuant to section 5.06(ii) of the Plan, and the
---------------
Recipient shall remit to the Company any additional amounts which may be
required.
B. That the Company shall have the right (unless the Company in its sole
discretion, and without any obligation to do so) registers the Option Shares
under Form S-8 or any comparable registration statement) to place the
following legend (or any variation thereof determined appropriate by the
Company) on the share certificate or certificates for the Option Shares to
comply with applicable federal, state and territorial securities laws:
"The securities represented by this certificate have not been (1)
registered under the United States Securities Act of 1933, as amended, in
reliance upon an exemption from registration afforded by such act, or (2)
registered under the securities laws of any state or territory of the
United States which may be applicable, in reliance upon an exemption from
registration afforded by such state or territorial securities laws. These
securities have been acquired for the holder's own account for investment
purposes and not with a view for resale or distribution.
-1-
<PAGE>
These securities may not be sold or transferred within the United States or
any of its territories unless (1) they have been registered under the
United States Securities Act of 1933 as well as under the securities laws
of any state or territory of the united states as may then be applicable,
or (2) the transfer agent (or the company if then acting as its transfer
agent) is presented with either a written opinion satisfactory to counsel
for the Company or a no-action or interpretive letter from the United
States Securities and Exchange Commission and any applicable state or
territorial securities regulatory agency to the effect that such
registration is not required under the circumstances of such sale or
transfer."
C. That the Company shall have the right (unless the Company in its sole
discretion, and without any obligation to do so) obtains a discretionary
order from any applicable provincial securities commission, to place the
following legend (or any variation thereof determined appropriate by the
Company) on the share certificate or certificates for the Option Shares to
comply with applicable provincial securities laws:
"Residents of Alberta or any other province of Canada are subject to an
indefinite hold period, and the transfer of these securities by a resident
of these provinces can only be effectuated pursuant to an exemption from
the registration and prospectus requirements of the applicable securities
act of such provinces or pursuant a discretionary order of the applicable
securities commission."
D. That the Company shall have the right to place the following legend (or any
variation thereof determined appropriate by the Company) on the share
certificate or certificates for the Option Shares to comply with the Drag-
Along Rights granted to the Company pursuant to Article XV of the Plan:
"The securities represented by this certificate are subject to certain
drag-along rights set forth in full in that certain 1999 Pinnacle Oil
International, Inc. Executive Stock Option Plan dated April 27, 1999, as it
may be amended or restated from time to time, a copy of which may be
inspected by authorized persons at the principal office of the Company, and
all the provisions of which are incorporated by reference in this
certificate."
The Recipient hereby makes the following representations, warranties or
covenants to the Company, each of which is deemed to be a separate
representation, warranty and covenant:
A. The Recipient's permanent legal residence and domicile, if the Recipient is
an individual, or permanent legal executive offices and principal place of
business, if the Recipient is an Entity, is in the State, territory or
province specified below the Recipient's signature below on this Notice as
of the time of his, her or its exercise of the Stock Option Certificate.
B. The Recipient, if a natural person, is age eighteen (18) or over.
C. The Recipient has received a copy of the Plan as well as a copy of the 1999
Pinnacle Oil International, Inc. Executive Stock Option Plan Summary (the
"Plan Summary"), which explains the administration and operation of the
Plan, risk factors concerning an investment in the Common Stock and the
Company, the tax consequences of grants of Options under the Plan, and
certain other relevant matters pertaining to the Plan, and has read and
understood the Plan and the Plan Summary.
D. The Recipient:
1. has taken the opportunity, prior to exercising the Option, to engage
such investment professionals and advisors including, without
limitation, accountants, appraisers, investment, tax and legal
advisors, each of whom are independent of the Company and its advisors
and agents, to:
-2-
<PAGE>
No.0__
================================================================================
(A) conduct such due diligence review as the Recipient and/or such
investment professionals and advisors deem necessary or
advisable; and
(B) to provide such opinions as to (i) the investment merits of a
proposed investment in the Option Shares, the tax consequences of
the grant and exercise of the Option, and the subsequent
disposition of the Option Shares, and (ii) the effect of same
upon the Recipient's personal financial circumstances, as the
Recipient and/or his, her or its investment professionals and
advisors have or may deem advisable; and
2. has received, to the extent he, she or it has availed himself,
herself or itself of these opportunities, satisfactory
information and answers from such investment professionals and
advisors.
E. Without limiting the generality of the immediately preceding
paragraph, prior to exercising the Option:
1. the Recipient and his, her or its investment professionals and
advisors have taken the opportunity, to the extent the Recipient
and/or such investment professionals and advisors have determined it
to be necessary, to:
(A) be provided with financial and other written information (in
addition to that contained in the Plan and Plan Summary);
(B) ask questions and receive answers concerning the terms and
conditions of the Stock Option Certificate, an investment in the
Option Shares, and the business of the Company and its finances;
and
(C) review all documents, books and records of the Company; and
2. the Recipient and/or his, her or its investment professionals and
advisors have received, to the extent they have availed themselves of
these opportunities, satisfactory information and answers.
F. With the exception of written information given to the Recipient by the
principal executive officers of the Company, no person has provided any
information (other than the provision of the Plan and Plan Summary), or
made any representations to the Recipient, concerning the Company or its
past, present or future business; on which the Recipient has relied in
offering to purchase the Option Shares.
G. The Recipient has been informed and understands and agrees as follows:
1. Unless and to the extent the Company has registered the Option Shares
there are substantial restrictions on the transferability of the
Option Shares as set forth in the Plan and as are more particularly
described in the Plan Summary;
2. as a result of such restrictions,
(A) it may not be possible for the Recipient to sell or otherwise
liquidate the Option Shares in the case of emergency and/or other
need, and the Recipient must therefore be able to hold the Option
Shares until the lapse of said restrictions,
(B) the Recipient must have adequate means of providing for the
Recipient's current needs and personal contingencies, and
(C) the Recipient must have no need for liquidity in an investment in
the Option Shares; and
-3-
<PAGE>
No.0__
================================================================================
3. the Recipient has evaluated the Recipient's financial resources and
investment position in view of the foregoing, and the Recipient is
able to bear the economic risk of an investment in the Option Shares.
H. Unless and to the extent the Company has registered the Option Shares:
1. the Option Shares will be purchased by the Recipient as principal and
not by any other person, with the Recipient's own funds and not with
the funds of any other person, and for the account of the Recipient
and not as a nominee or agent and not for the account of any other
person;
2. the Recipient will purchase the Option Shares for investment purposes
only for an indefinite period, and not with a view to the sale or
distribution of any part or all thereof by public or private sale or
other disposition; and
3. no person other than the Recipient will have any interest, beneficial
or otherwise, in the Option Shares, and the Recipient is not obligated
(and will not be obligated at time of exercise) to transfer the Option
Shares to any other person, nor does the Recipient have any agreement
or understanding to do so.
I. The Recipient has complied with all applicable investment laws and
regulations in force relating to the legality of an investment in the
Option Shares by the Recipient in any jurisdiction in which he, she or it
purchases the Option Shares, and has obtained any consent, approval or
permission required of him, her or it for the purchase of the Option Shares
under the investment laws and regulations in force in any jurisdiction to
which he, she or it is subject, or in which he, she or it makes such
purchase, and the Company shall have no responsibility therefor.
J. With the exception of the provision of the Plan and the Plan Summary, the
Recipient has not seen, received, been presented with or been solicited by
any advertisement, article, notice, leaflet or other communication (whether
published in any newspaper, magazine, or similar media or broadcast over
television or radio or otherwise generally disseminated or distributed); or
through any public or promotional seminar or meeting to which the Recipient
was invited through any such advertisement, article, notice, leaflet or
other communication.
K. The Recipient has not retained an broker-dealer, placement agent or finder
to whom the Company will have any obligation to pay any commissions or
fees.
Each of the foregoing representations, warranties, and covenants of the
Recipient shall be deemed made as of the date the Recipient exercises this
Option, and shall survive the date of closing with respect to the exercise of
the last Option hereunder.
Signature must conform in all respects to name of Recipient as specified in the
Plan, unless the undersigned is the Recipient's Successor, in which case the
undersigned must submit appropriate proof of right of the undersigned to
exercise the Option.
Signature:
-----------------------------------------
Print Name:
-----------------------------------------
Address:
-----------------------------------------
-----------------------------------------
Date: -----------------------------------------
-4-
<PAGE>
EXHIBIT 4.7
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement"), dated effective as
of May 1, 1999, is entered into by and between Pinnacle Oil International, Inc.,
a Nevada corporation (the "Company") and Daniel C. Topolinsky (the "Executive"),
with reference to the following facts:
RECITALS:
--------
WHEREAS, the Company desires to employ the Executive as its President in
order to enable the Company to avail itself of the skill, knowledge and
experience of the Executive and to assure the successful management of the
Company, and the Executive desires to become employed in such executive officers
position or positions;
WHEREAS, the Company and the Executive desire to enter into a written
employment agreement formally documenting their relationship and setting forth
the duties and responsibilities the Company desires the Executive to undertake,
and which the Executive has agreed to undertake.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for valuable consideration, the receipt and sufficiency of
which are hereby mutually acknowledged, the parties to this Agreement
(collectively "parties" and individually a "party") agree as follows:
AGREEMENT:
---------
1. DEFINITIONS
Set forth below are definitions of capitalized words or terms which
(together with those common words and terms set forth in section 15(l)) are
-------------
generally used throughout this Agreement, or references to sections or
paragraphs containing those definitions (capitalized terms used only in a
specific section or paragraph of this Agreement are defined in that section or
paragraph):
(a) "Advance" is defined in section 9.
(b) "Affiliate" means any "Person" (as defined below) controlling,
controlled by, or under common control with a party.
(c) "Agreement" means this Agreement, as originally executed and as
it may be: (i) amended, modified, supplemented and/or restated from time to time
(but only to the extent amended, modified, supplemented and/or restated in
accordance with the terms of this Agreement); and/or (ii) renewed or extended in
accordance with its terms.
(d) "Applicable Laws" means any federal (both of the United States
and Canada), state, provincial local or foreign laws or regulations as may be
applicable.
(e) "Board" means the Board of Directors of the Company, as such
body may be reconstituted from time to time.
(f) "Change In Control" shall mean the occurrence of any of the
following events:
(i) A "Control Acquisition" by an "Acquiring Person" pursuant
to which Acquiring Person attains, by reason of and immediately after a
transaction or series of related
<PAGE>
transactions, "Beneficial Ownership" of fifty percent (50%) or more of the
"Total Combined Voting Power" of the Company's then outstanding "Voting
Securities." The terms in quotations in the immediately preceding sentence
shall, for purposes of this Agreement, have the following meanings:
(1) "Acquiring Person" shall mean any "Person" which acquires
the defined) "Acquiring Person" shall mean any "Person" which acquires the
defined percentage of securities, with the exception of: (A) any Employee
Benefit Plan (or a trust forming a part thereof) maintained by the Company,
or by any corporation or entity in which the Company holds fifty percent
(50%) or more of the "Voting Securities" (each, a "Controlled Subsidiary");
(B) the Company or any Controlled Subsidiary; or (C) any "Person" which
acquires the threshold percentage of "Voting Securities" through a "Non-
Control Transaction" (as defined below).
(2) "Non-Control Transaction" shall mean any transaction in
which the stockholders of the Company immediately before such transaction,
directly or indirectly own immediately following such transaction at least a
majority of the "Total Combined Voting Power" of the outstanding "Voting
Securities" of the surviving corporation (or other entity) resulting from
such transaction, in substantially the same proportion as such stockholders'
ownership of the Company's "Voting Securities" immediately before such
transaction.
(3) "Person," "Beneficial Ownership," "Total Combined Voting
Power" and "Voting Securities" shall have the meanings ascribed to such
terms in Sections 13(d) and 14(d) of the Securities Exchange Act and Rule
13d-3 promulgated thereunder.
Notwithstanding any other provision of this subsection (f)(i), a
-----------------
Change In Control shall not be deemed to have occurred solely because any
Person acquired Beneficial Ownership of more than the threshold percentage of
the outstanding Voting Securities as a result of an acquisition of Voting
Securities by the Company (each, a "Redemption") which, by reducing the number
of Voting Securities outstanding, increased the percentage of outstanding
Voting Securities Beneficially Owned by such Person; provided, however, that if
(A) a Change In Control would occur as a result of a Redemption but for the
operation of this sentence, and (B) after such Redemption, such Person becomes
the Beneficial Owner of any additional Voting Securities, which increase the
percentage of the then outstanding Voting Securities Beneficially Owned by such
Person over the percentage owned as a result of the Redemption, then a Change
In Control shall be deemed to have occurred.
(ii) During any period of three (3) consecutive years after the date
of this Agreement, the individuals who constituted the Board at the beginning
of such period (the "Incumbent Board") cease to constitute a majority of the
Board, for any reason(s) other than (1) the voluntary resignation of one or
more Board members; (2) the refusal by one or more Board members to stand for
election to the Board; and/or (3) the removal of one or more Board members for
good cause; provided, however, (A) that if the nomination or election of any
new director of the Company was approved by a vote of at least a majority of
the Incumbent Board, such new director shall be deemed a member of the
Incumbent Board; and (B) that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened "Election Contest" (as described in Rule 14a-11
-2-
<PAGE>
promulgated under the Securities Exchange Act of 1934), or as a result of a
solicitation of proxies or consents by or on behalf of an Acquiring Person,
other than a member of the Board (a "Proxy Contest"), or as a result of any
agreement intended to avoid or settle any Election Contest or Proxy Contest.
(iii) The Board or the stockholders of the Company approve:
(1) A merger or consolidation or reorganization of the
Company reorganization (each, a "Major Event") with (A) any Controlled
Subsidiary, and the terms of the proviso to this subsection (f)(iii) are not
-------------------
satisfied; or (B) any other corporation or other entity; unless such Major
Event is a Non-Control Transaction; or
(2) A complete liquidation or dissolution of the Company,
and the terms of the proviso to subsection (f)(iii) are not satisfied; or
-------------------
(3) An agreement for the sale or other disposition of all
or substantially all of the assets of the Company to any Controlled
Subsidiary, and the terms of the proviso to subsection (f)(iii) are not
-------------------
satisfied.
Notwithstanding any other provision of this subsection
----------
(f)(iii), if the Executive or an Affiliate of the Executive who is then a
--------
stockholder or director of the Company, either: (i) expressly voted in favor
of the transaction constituting the Change In Control in such Person's
capacity as either a stockholder or as a director of the Company; or (ii)
expressly abstained from voting (other than by reason of an "interest" in a
matter or transaction, as defined in the Nevada Revised Statutes); and/or
(iii) failed or refused to vote, then the transaction shall not constitute a
Change in Control.
(g) "Company" means Pinnacle Oil International, Inc., a Nevada
Corporation, and any successor and assign of the Company, as more particularly
described in, or permitted and prescribed pursuant to, section 17(a).
-------------
(h) "Disability" (or the related term "Disabled") means any of the
following: (i) the receipt of any disability insurance benefits by the
Executive; (ii) a declaration by a court of competent jurisdiction that the
Executive is legally incompetent; (iii) the Executive's material inability due
to medically documented mental or physical illness or disability to fully
perform the Executive's regular obligations of his office and as an employee of
the Company (with reasonable accommodations for such disability, if then
required by Applicable Law), for a six (6) month continuous period, or for nine
(9) cumulative months within any one (1) year continuous period; or (iv) the
reasonable determination by the Board that the Executive will not be able to
fully perform the Executive's regular obligations of his office and as an
employee of the Company (with reasonable accommodations if then required by
Applicable Law) for a six (6) month continuous period. If the Board determines
that the Executive is Disabled under clause (iv) above, and the Executive
-----------
disagrees with the conclusion of the Board, then the Company shall engage a
qualified independent physician reasonably acceptable to the Executive to
examine the Executive at the Company's sole expense. The determination of such
physician shall be provided in writing to the parties and shall be final and
binding upon the parties for all purposes of this Agreement. The Executive
hereby consents to examination in the manner
-3-
<PAGE>
set forth above, and waives any physician-patient privilege arising from any
such examination as it relates to the determination of the purported disability.
(i) "Employee Benefit Plan" is defined in section 4(c).
------------
(j) "Employee Deductions" are defined in section 6.
---------
(k) "Monthly Salary" is defined in section 4(a).
------------
(l) "Performance Bonus" is defined in section 4(b).
------------
(m) "Person" (other than for purposes of determining a Change in
Control) means an individual or natural person, a corporation, partnership
(limited or general), joint-venture, association, business trust, limited
liability company/partnership, business trust, trust (whether revocable or
irrevocable), pension or profit sharing plan, individual retirement account, or
fiduciary or custodial arrangement.
(n) "Personal Time-Off" is defined in section 7.
---------
(o) "Subsidiary" shall mean any corporation, partnership (limited or
general), joint-venture, association, business trust, limited liability
company/partnership, business trust or trust in which the Company holds a
controlling interest, including but not limited to Pinnacle Oil, Inc., a Nevada
corporation ("Pinnacle Oil"), and Pinnacle Oil Canada, Inc., a British Columbia
corporation ("Pinnacle Canada").
(p) "Termination By Company For Cause" means a termination of the
Executive caused by a determination of two-thirds of the Board, excluding the
Executive if then a member of the Board, that one of the following events has
occurred:
(i) Any of the Executive's representations or warranties in this
Agreement is not materially true, accurate and/or complete;
(ii) The Executive has intentionally and continually breached or
wrongfully failed and/or refused to fulfill and/or perform (A) any of the
Executive's material obligations, promises or covenants under this
Agreement, or (B) any of the material warranties, obligations, promises or
covenants in any agreement (other than this Agreement) entered into between
the Company and the Executive, without cure, if any, as provided in such
agreement;
(iii) The Executive has intentionally failed and/or refused to
obey any lawful and proper order or directive of the Board, and/or the
Executive has intentionally interfered with the compliance by other
employees of the Company with any such orders or directives;
(iv) The Executive has intentionally breached the Executive's
fiduciary duties to the Company;
(v) The Executive has intentionally caused the Company to be
convicted of a crime, or to incur criminal penalties in material amounts;
-4-
<PAGE>
(vi) The Executive has committed: (A) any act of fraud,
misrepresentation, theft, embezzlement or misappropriation, and/or any
other dishonest act against the Company and/or any of its Affiliates,
subsidiaries, joint ventures; or (B) any other offense involving moral
turpitude, which offense is followed by conviction or by final action of
any court of law; or (C) a felony;
(vii) The Executive repeatedly and intemperately used alcohol or
drugs, to the extent that such use (A) interfered with or is likely to
interfere with the Executive's ability to perform the Executive's duties,
and/or (B) endangered or is likely to endanger the life, health, safety, or
property of the Executive, the Company, or any other person;
(viii) The Executive has intentionally demonstrated or committed
such acts of racism, sexism or other discrimination as would tend to bring
the Company into public scandal or ridicule, or could otherwise result in
material and substantial harm to the Company's business, reputation,
operations, affairs or financial position; and/or
(ix) The Executive engaged in other conduct constituting legal
cause for termination.
No act, nor failure to act, on the Executive's part shall be
considered "intentional" unless the Executive has acted, or failed to act, with
a lack of good faith and with a lack of reasonable belief that the Executive's
action or failure to act was in the best interests of the Company. In the event
the Executive is both Disabled and the provisions of clause (vii) of this
------------
subsection (p) are applicable, the Company shall nevertheless have the right to
- --------------
deem such event as a Termination By Company For Cause.
(q) Termination By Executive For Good Reason" means the Executive's
termination of this Agreement based on his reasonable determination that one of
the following events has occurred:
(i) Any of the Company's representations or warranties in this
Agreement is not materially true, accurate and/or complete;
(ii) The Company intentionally and continually breached or
wrongfully failed to fulfill or perform (A) its material obligations,
promises or covenants under this Agreement; or (B) any material warranties,
obligations, promises or covenants of the Company in any agreement (other
than this Agreement) entered into between the Company and the Executive,
without cure, if any, as provided in such agreement;
(iii) The Company terminated this Agreement and the Executive's
employment hereunder (with the exception of Treasurer), and such
termination does not constitute Termination By Company For Cause;
(iv) Without the consent of the Executive, the Company: (A)
substantially altered or materially diminished the position, nature,
status, prestige or responsibilities of the Executive from those in effect
by mutual agreement of the parties from time-to-time; (B) assigned
additional duties or responsibilities to the Executive which were wholly
and clearly inconsistent with the position, nature, status, prestige or
responsibilities of the Executive then in effect; or (C) removed or failed
to reappoint or re-elect the Executive to the Executive's offices
-5-
<PAGE>
under under this Agreement (as they may be changed or augmented from time-
to-time with the consent of the Executive), or as a director of the
Company, except in connection with the Disability of the Executive;
(v) Without the consent of the Executive, the Company relocated
the Company's principal operating offices from their present location, and
as a result increased the Executive's ordinary commute from the Executive's
temporary residence by more than thirty-five (35) miles;
(vi) Without the consent ratification (express or implied) of
the Executive, the Executive was removed from the Board without his
consent; or the Company failed to nominate or reappoint the Executive to
the Board (unless the Executive is deceased or Disabled, or such removal or
failure is attributable to an event which would constitute Termination By
Company For Cause), or if the Executive was so nominated, the stockholders
of the Company failed to re-elect the Executive to the Board;
(vii) The Company intentionally required the Executive to commit
or participate in any felony or other serious crime; and/or
(viii) The Company engaged in other conduct constituting legal
cause for termination.
In the event any of the events described above in this subsection (q)
--------------
occurs, and such event is reasonably susceptible of being cured, the Company
shall be entitled to a grace period of thirty (30) days following receipt of
written notice of such event. If the Executive determines, in his sole
discretion, that such event is not reasonably susceptible of being cured within
a period of thirty (30) days), the Executive may grant a longer cure period to
the Company to cure such event to the reasonable satisfaction of the Executive,
provided the Company promptly commences and diligently pursues such cure. The
noted grace periods shall not apply to any other event described in this
subsection (q).
- --------------
2. EMPLOYMENT OBLIGATIONS
(a) Engagement; Duties. The Company hereby engages the Executive
------------------
as its President, and the Executive accepts such position, upon the terms and
conditions set forth herein. As the Company's President, the Executive shall do
and perform all services, acts, or things necessary or advisable to discharge
his duties as the Company's President under this Agreement and the Company's
Bylaws including, but not limited to, the following:
(i) Managing, conducting and supervising the day-to-day
administrative business of the Company (and/or its Subsidiaries) such as,
by way of example and not limitation, hiring and firing employees and
consultants and establishing compensation levels for such employees and
consultants; and negotiating and entering into contracts on behalf of the
Company (and/or its Subsidiaries) with respect to the ordinary operations
of the business of the Company (and/or its Subsidiaries) such as, by way of
example and not limitation, exploration, equipment, purchase and lease
contracts.
-6-
<PAGE>
(ii) On behalf of the Company, negotiating and entering into
agreements, contracts and/or joint ventures with third parties relating to
the provision of the Company's SFD Data;
(iii) Acting as the Company's liaison with its attorneys,
certified public accountants, bankers, joint venture partners, market
makers for the Company's securities and the investment community; and
(iv) Developing and implementing long-term strategic, business
and fiscal planning for the Company (and/or its Subsidiaries) and their
businesses, including but not limited to plans or capital requirements for
financing, the commercial exploitation of SFD Data, finance, and
positioning the Company's securities in the various capital markets.
The Executive shall report only to the Company's Chief Executive
Officer and the Board, and any significant employment decisions and/or
agreements, contracts and/or joint ventures negotiated by the Executive shall be
subject to the review and approval/ratification of the Board. The Executive's
responsibilities with respect to the Company and each of its Subsidiaries may be
changed or supplemented by the Board from time-to-time, in their discretion.
The Executive shall also hold such offices with the Subsidiaries and/or joint
ventures of the Company as the Board may, in its discretion and with the consent
of the Executive, from time-to-time determine. The Board shall determine the
amount of the Executive's total remuneration which will be allocated to and paid
by the Company and by each of its Subsidiaries. The Executive shall be
reasonably available to travel as the needs of the Company's business may
require. The Executive agrees to cooperate with and work to the best of his
ability with the Company's (and/or its Subsidiaries') management team, which
includes the Board and the executive officers, and to continually improve the
Company's (and/or its Subsidiaries') reputation in its industry.
(b) Performance. The Executive shall devote the Executive's entire
-----------
and undivided business time, energy, abilities and attention solely and
exclusively to the performance of the Executive's duties hereunder and the
business of the Company (and/or its Subsidiaries); provided, however, the
foregoing shall not be construed to prohibit the Executive from attending to
personal matters from time-to-time as needed during business hours to the extent
reasonably necessary to address such matters. The Executive shall at all times
faithfully, loyally, conscientiously, diligently and, to the best of the
Executive's ability, perform all of the Executive's duties and obligations under
this Agreement, and otherwise promote the interests and welfare of the Company
(and/or its Subsidiaries), all consistent with the highest and best standards of
the Company's industry. The Executive: (i) shall strictly comply with and adhere
to all Applicable Laws, and the Company's Articles of Incorporation, Bylaws and
policies; (ii) shall obey all reasonable rules and regulations and policies now
in effect or as subsequently modified governing the conduct of employees of the
Company, and (iii) shall not commit any acts of gross negligence, willful
misconduct, dishonesty, fraud or misrepresentation, racism, sexism or other
discrimination, or any other acts which would tend to bring the Company (and/or
its Subsidiaries) into public scandal or ridicule, or would otherwise result in
material harm to the Company's business or reputation.
(c) Facilities and Services. The Company (and/or its
-----------------------
Subsidiaries) shall provide such support staff, facilities, equipment and
supplies as are reasonably necessary or suitable for the adequate performance of
the Executive's duties and obligations under this Agreement, including technical
and secretarial help.
-7-
<PAGE>
3. TERM
(a) Initial Term. The Company hereby employ the Executive
------------
pursuant to the terms of this Agreement, and the Executive hereby accepts such
employment with the Company, for the period beginning on the date of this
Agreement and ending on April 30, 2004 (the "Initial Term").
(b) Automatic Renewal; Termination by the Company. Unless this
---------------------------------------------
Agreement is previously terminated by either party as provided in section 10
----------
below, this Agreement will be automatically renewed for additional and
consecutive one (1) year terms (each, a "Renewal Term") following the expiration
of each Initial or Renewal Term, (each a "Term"), unless either party gives
------
written notice to the other party, no later than sixty (60) days prior to the
expiration of the then pending Term, of its election not to automatically renew
---
this Agreement for an additional year.
4. COMPENSATION
(a) Monthly Base Salary. The Company shall pay or caused to be
-------------------
paid to the Executive a monthly base salary of twenty thousand Canadian dollars
(CDN $20,000) (the "Monthly Salary"). The Monthly Salary shall be payable in
periodic installments as agreed from time-to-time by the Executive and the
Board, but at least semi-monthly, and shall be subject to any Tax Withholdings
and/or Employee Deductions that are applicable. In any pay period in which the
Executive shall be employed for less than the entire number of business days in
such pay period, the Monthly Salary for such pay period shall be prorated on the
basis of the number of business days during which the Executive was actually
employed during such pay period, divided by the actual number of business days
in such pay period. Commencing on the first annual anniversary date of this
Agreement, and on each annual anniversary date thereafter, the Monthly Salary
then effective shall be increased by an amount equal to five percent (5%) of the
Monthly Salary for the immediately prior year. Additionally, commencing on or
prior to the first annual anniversary date of this Agreement, and on or prior to
each annual anniversary date thereafter, the Board shall review the Executive's
Monthly Salary to determine whether to increase the Monthly Salary by an amount
in excess of said five percent (5%) increment, without any obligation by the
Board to authorize such increase.
(b) Performance Bonus. The Board shall from time-to-time, but
-----------------
not less than one (1) time per year, evaluate the performance of the Executive
and award to the Executive a performance bonus (the "Performance Bonus") in such
amount as the Board may determine, in its sole discretion, to be reasonable,
after taking into consideration other compensation paid or payable to the
Executive under this Agreement, as well as the financial and non-financial
progress of the business of the Company (and/or its Subsidiaries) and the
contributions of the Executive toward that progress. Payment of the Performance
Bonus shall be subject to any applicable Tax Withholdings and/or Employee
Deductions.
(c) Participation in Employee Benefit Plans. The Executive shall
---------------------------------------
have the same rights, privileges, benefits and opportunities to participate in
any employee benefit plans of the Company which may now or hereafter be in
effect on a general basis for the Company's executive officers or employees,
including without limitation retirement, pension, profit-sharing, savings and
insurance (including, but not limited to, health, dental, disability and/or
group insurance) (collectively, "Employee Benefit Plans").
-8-
<PAGE>
(d) Stock Options.
-------------
(i) The Company agrees to grant to the Executive an option (the
"First Option") to purchase up to three hundred thousand (300,000)
unregistered shares of the Company's common stock, which right to purchase
shall vest incrementally over a period of four (4) years based upon continuous
employment, with the first increment of eighty-five thousand (85,000) shares
vesting one year from the date of this Agreement, the second increment of
ninety thousand (90,000) shares vesting two years from the date of this
Agreement; the third increment of ninety-five thousand (95,000) shares vesting
three years from the date of this Agreement, and the fourth increment of
thirty thousand (30,000) shares vesting four years from the date of this
Agreement The purchase price per share shall be U.S. $14 per share.
(ii) The Company agrees to grant to the Executive an option (the
"Second Option") to purchase up to two hundred thousand (200,000) unregistered
shares of the Company's common stock, which right to purchase shall vest
incrementally over a period of five (5) years based upon continuous
employment, with the first increment of seventy-five thousand (75,000) shares
vesting four year from the date of this Agreement, and the second increment of
one hundred twenty-five thousand (125,000) shares vesting five years from the
date of this Agreement. The purchase price per share shall be the closing
sales price for the Company's common stock as quoted by the NASD Electronic
Bulletin Board (or any replacement market or exchange) on April 30, 2001.
(iii) The Company agrees, so long as it is a reporting company, to
use its best efforts to register the options shares under an S-8 Registration
Statement.
(iv) The term for the Executive to exercise the First Option or
Second Option (collectively, the "Option") with respect to any vested share
shall expire five (5) years from the date of vesting of such share provided,
however, if the Executive's employment with the Company has been previously
terminated pursuant to section (vi) below, the expiration date shall be
------------
accelerated to two (2) years after the effective date of termination (if
earlier than the option expiration date).
(v) In the event of the death or Disability of the Executive, all
unvested Options Shares which would have vested within the twelve (12) month
--------
period following the date of death or Disability will vest effective as of the
date of death or Disability, and the prospective right to purchase the balance
of the remaining unvested option shares shall lapse.
--------
(vi) In the event the Executive's employment with the Company is
terminated, and such termination is attributable to (A) an event defined as
Termination By Company for Cause; and/or (B) termination by the Executive
which does not constitute Termination By Executive For Good Reason; then the
---
prospective right to purchase unvested option shares shall lapse to the extent
--------
such rights do not vest prior to the effective date of termination.
(vii) In the event the Executive's employment with the Company is
terminated, and such termination is attributable to (A) an event defined as a
Termination by Executive for Good Reason; (B) termination by the Company which
does not constitute a Termination By Company for Cause and/or (C) an event
defined as a Change in Control; then the
-9-
<PAGE>
prospective right to purchase all unvested options shares which would have
--------
vested within the twelve (12) month period following the date of such event
will vest effective as of the date of such event, and the prospective right to
purchase the balance of the remaining unvested option shares shall lapse.
--------
(viii) The grant of the Options shall be evidenced by a Stock Option
Certificate reflecting the above terms plus such additional terms and
conditions as required by a Plan established by the Company and containing
such other terms as the Company believes to be reasonable.
(ix) The Executive shall be responsible for all income taxes
(including tax withholdings) attributable to the grant or exercise of the
Option, or the sale of the option shares acquired by exercise of the Option.
5. BUSINESS EXPENSES
During the Term of this Agreement the Executive is authorized to incur,
and the Company (and/or its Subsidiaries) shall directly pay or reimburse the
Executive for his or her payment of the Executive's reasonable and necessary
business expenses, duly and actually incurred by the Executive in connection
with the duties and services to be performed by the Executive under this
Agreement, including without limitation entertainment, meals, travel, lodging
and other similar out-of-pocket expenses, upon the Executive's submission to the
Company (and/or its Subsidiaries) of itemized expense statements setting forth
the date, purpose and amount of the expense incurred, together with
corresponding receipts showing payment by the Executive in cases where he or she
seeks reimbursement, all in conformity with business expense payment and/or
reimbursement policies as may be established by the Company (and/or its
Subsidiaries) from time to time, all of which shall comply with the
substantiation requirements of the Internal Revenue Code of 1986, as amended,
and the Income Tax Act of Canada, as amended, and any other applicable taxing
authorities, and regulations promulgated by such authorities thereto, pertaining
to the deductibility of such expenses. Direct payment and/or reimbursement shall
be made by the Company (and/or its Subsidiaries) no later than thirty (30) days
of the Executive submission of the foregoing documentation. The Executive shall
be entitled to direct payment and/or reimbursement in full for the aforesaid
business expenses, notwithstanding that the Company is prohibited under the Code
and/or regulations promulgated thereunder from deducting the entire amount of
such expenses. The Company (and/or its Subsidiaries) shall have the option to
pay directly the persons entitled to payment for such business expenses.
6. TAX WITHHOLDINGS AND EMPLOYEE DEDUCTIONS
The Company (and/or its Subsidiaries) shall be entitled to deduct from
any payments to the Executive pursuant to the terms of this Agreement (including
any payments arising from the early termination of this Agreement), amounts
sufficient to cover applicable federal (United States and Canada), state,
provincial, local and/or foreign income tax withholdings and/or deductions as
may be required in connection with such payment, including without limitation
old-age and survivor's and other social security payments, state disability and
other withholdings payment as may be required by law (collectively, the "Tax
Withholdings"), as well as all other elective employee deductions applicable to
such payment such as, for example, deductions relating to any Employee Benefit
Plan in which the Executive participates (collectively, the "Employee
Deductions").
-10-
<PAGE>
7. PERSONAL TIME-OFF
The Executive shall be entitled each calendar year during the term of
this Agreement to such number of personal time-off days for such purposes,
including vacations and time for personal affairs ("Personal Time-Off") as are
approved by the Board, but not less than the greater of (i) fifteen (15)
business days, or (ii) the number of personal time-off days (including vacation
and personal days) generally given by the Company to its employees. Personal
Time-Off shall be in addition to regular paid legal holidays provided to all
employees of the Company. The Executive's compensation shall be paid in full
with respect to approved Personal Time-Off days. Should the Executive fail to
use all Personal Time-Off days in any calendar year, the Executive shall have
the option of (i) receiving payment for such days on a pro rata basis, or (ii)
"carrying-over" unused Personal Time-Off days to succeeding years. Personal
time-off shall be taken during a period or periods mutually satisfactory to both
the Company and the Executive.
8. INSURANCE
If requested by the Company, the Executive shall submit to such
physical examinations and otherwise take such actions and execute and deliver
such documents as may be reasonably necessary to enable the Company, at its
expense and for its own benefit, to obtain disability and/or life insurance on
the life of the Executive. The Executive represents and warrants that he has no
reason to believe that he is not insurable for disability or life coverage with
a reputable insurance company at rates now prevailing in the city of the
Company's principal executive offices, for healthy persons of the Executive's
own age and gender.
9. ADVANCES
The Company (and/or its Subsidiaries) may from time-to-time, upon
written consent from the Chairman of the Board or the Board, and without any
obligation to do so, make advances to the Executive against any compensation or
other amounts to be paid by the Company (and/or its Subsidiaries) to the
Executive (each, an "Advance"). Any amounts due hereunder to the Executive
shall, at the election of the Company, be offset by any then outstanding
Advances.
Subject to the terms of any written agreement relating to Advances, in
the event of termination of employment of executive, the Executive agrees that
the Company (and/or its Subsidiaries) shall have the right to offset the amount
of any and all outstanding Advance(s) against any salary or wages due, or any
other amounts due to the Executive from the Company, and that any remaining
balance of the Advance(s) shall be repaid by the Executive within thirty (30)
days after the Executive's termination date. If such Advance(s) are not repaid
within said thirty (30) days, simple interest shall accrue on the unpaid balance
at the rate of ten percent (10%) per annum. The Executive agrees to pay all
costs of collection incurred by the Company (and/or its Subsidiaries) with
respect thereto, including reasonable attorneys' fees and legal costs.
The Company's obligation to make payments to the Executive hereunder
shall not, except with respect to Advance(s) as provided above, be affected by
any circumstance, including without limitation any set-off, counterclaim,
recoupment, defense or other right which the Company (and/or its Subsidiaries)
may have against the Executive or others.
-11-
<PAGE>
10. TERMINATION OF AGREEMENT BEFORE EXPIRATION OF TERM
(a) Death or Disability. Notwithstanding any other term of this
-------------------
Agreement, the applicable Term shall terminate upon the death or Disability of
the Executive, subject to compliance with Applicable Laws.
(b) Change In Control. Notwithstanding any other term of this
-----------------
Agreement, the applicable Term shall, at the election of the Executive,
delivered by written notice to the Company, terminate effective upon the Change
In Control.
(c) Termination of Agreement by Company for Cause. Subject to
---------------------------------------------
compliance with Applicable Laws, the Company may terminate this Agreement and
the Executive's employment hereunder at any time in the event such termination
constitutes Termination By Company For Cause, upon giving written notice to the
Executive specifying in reasonable detail: (i) the event which constitutes the
cause; (ii) the pertinent facts and circumstances underlying the cause; and
(iii) the effective date of the termination(which date may, at the Company's
election, be effective upon receipt of said written notice by the Executive).
Such notice shall also afford the Executive an opportunity to be heard in person
by the Board (with the assistance of the Executive's legal counsel, if the
Executive so desires). Such hearing shall be held reasonably promptly after such
notice but, in any event, before the effective date of the prospective
termination.
(d) Termination of Agreement by Executive for Good Reason. The
-----------------------------------------------------
Executive may terminate this Agreement and the Executive's employment hereunder
at any time in the event such termination constitutes Termination By Executive
For Good Reason, upon giving written notice to the Company specifying in
reasonable detail: (i) the event which constitutes the good reason; (ii) the
pertinent facts and circumstances underling the good reason; and (iii) the
effective date of termination (not to exceed ninety {90} days from the date of
such notice, but which date may, at the Executive's election, be effective upon
receipt of said written notice by the Company).
11. EFFECT OF TERMINATION ATTRIBUTABLE TO DEATH OR DISABILITY;
TERMINATION BY COMPANY FOR CAUSE; TERMINATION BY EXECUTIVE WITHOUT
GOOD REASON
In the event the Executive's employment hereunder is terminated
before the expiration of a Term, and such termination is attributable to (i) an
event defined as Death or Disability; (ii) an event defined as Termination By
Company For Cause; and/or (iii) termination by the Executive which does not
---
constitute Termination By Executive For Good Reason, then all rights and
obligations of the Company and the Executive under section 2 [Employment
---------
Obligations], section 4 [Compensation], section 5 [Business Expenses] and
--------- ---------
section 7 [ Personal Time-Off] shall terminate as of the effective date of the
- ---------
termination; provided, however:
(a) The Company (and/or its Subsidiaries) shall pay the Executive's
accrued but unpaid Monthly Salary and Personal Time-Off days through the
effective date of the termination on or before the close of business on such
effective date; and the Executive shall not be entitled to Monthly Salary and/or
Personal Time-Off days after the effective date of the termination;
-12-
<PAGE>
(b) The Company (and/or its Subsidiaries) shall pay any declared
but unpaid Performance Bonus;
(c) The Company (and/or its Subsidiaries) shall reimburse the
Executive for any business expenses incurred prior to the effective date of the
termination, within three (3) business days after the Executive's submission of
the Executive's expense report to the Company; and
(d) The Executive shall not be entitled to continue to participate
in any Employee Benefit Plans except to the extent provided in such plans for
terminated participants, or as may be required by Applicable Law.
Notwithstanding the foregoing, amounts which are vested in any Employee Benefit
Plans shall be payable in accordance with such plan.
12. EFFECT OF TERMINATION WHERE TERMINATION ATTRIBUTABLE TO CHANGE IN
CONTROL; TERMINATION BY EXECUTIVE FOR GOOD REASON; TERMINATION BY
COMPANY WITHOUT CAUSE
In the event the Executive's employment hereunder is terminated
before the expiration of a Term, and such termination is attributable to (i) an
event defined as a Change in Control; (ii) an event defined as a Termination by
Executive for Good Reason; and/or (iii) termination by the Company which does
not constitute a Termination By Company for Cause; then all rights and
obligations of the Company and the Executive under section 2 [Employment
---------
Obligations], section 4 [Compensation], section 5 [Business Expenses], and
--------- ---------
section 7 [Personal Time-Off] shall terminate as of the effective date of the
- ---------
termination date; provided, however:
(a) The Company (and/or its Subsidiaries) shall continue to pay
the Executive's then effective Monthly Salary through the earlier of (i) the
-------
pending Term of this Agreement or (ii) the period which expire eighteen (18)
months after the effective date of termination, on the same basis as previously
paid to the Executive, but subject to such minimum increases as are described in
section 4;
- ---------
(b) The Company (and/or its Subsidiaries) shall pay the Executive's
declared but unpaid Performance Bonus;
(c) At the election of the Executive, the Company (and/or its
Subsidiaries) shall (i) permit the Executive to continue to participate in any
Employee Benefit Plans, except to the extent prohibited in such plans for
terminated employees, or as may be required by Applicable Law; or (ii) provide
the Executive with additional compensation, payable on a monthly basis, which
would approximate the cost to the Executive to obtain comparable benefits;
(d) The Company (and/or its Subsidiaries) shall reimburse the
Executive for the Executive's business expenses incurred through the effective
date of the termination, within three (3) business days of the Executive's
submission of the Executive's expense report to the Company; and
The Executive shall not be required to mitigate the amount of any
payment pursuant to this section 12 by seeking other employment or otherwise,
----------
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment. The
Executive, in turn, agrees that the provisions of this section 12 shall act as a
----------
severance payment to the
-13-
<PAGE>
Executive, and as such shall satisfy all claims the Executive may have, whether
at law or equity; in connection with the early termination of this Agreement.
13. REPRESENTATIONS AND WARRANTIES OF PARTIES
(a) By All Parties. Each of the parties to this Agreement hereby
--------------
represents and warrants to each of the other parties to this Agreement, each of
which is deemed to be a separate representation and warranty, as follows:
(i) Organization, Power and Authority. Such party, if an
---------------------------------
entity, is duly organized, validly existing and in good standing under the
laws of its state, territory or province of incorporation or organization, and
has all requisite corporate or other power and authority to enter into this
Agreement.
(ii) Authorization. The execution and delivery of this
-------------
Agreement by such party, and the performance by such party of the transactions
herein contemplated, have, if such party is an entity, been duly authorized by
its governing organizational documents, and are not prohibited by its
governing organization documents, and no further corporate or other action on
the part of such party is necessary to authorize this Agreement, or the
performance of such transactions.
(iii) Validity. This Agreement has been duly executed and
--------
delivered by such party and, assuming due authorization, execution and
delivery by all of the other parties hereto, is valid and binding upon such
party in accordance with its terms, except as limited by: (1) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditor rights generally; and (2) general principles of
equity (regardless of whether such enforcement is considered in a proceeding
in equity or at law).
(iv) Non-Contravention. Neither the execution or delivery of
-----------------
this Agreement, nor the performance by such party of the transactions
contemplated herein: (1) if such party is an entity, will breach or conflict
with any of the provisions of such party's governing organizational documents;
or (2) to the best of such party's knowledge and belief, will such actions
violate or constitute an event of default under any agreement or other
instrument to which such party is a party.
(v) Legal Representation. Such party: (1) had the advice,
--------------------
or sufficient opportunity to obtain the advice, of legal counsel separate and
independent from legal counsel for any other party hereto; and (2) such party
was not represented by the legal counsel of any other party hereto in
connection with the transactions contemplated by this Agreement, nor was such
party under any belief or understanding that such legal counsel was
representing such party's interests.
(vi) Fairness. The terms and conditions of the transactions
--------
contemplated by this Agreement are fair and reasonable to such party based
upon all of the facts and circumstances at the time this Agreement is entered
into; and such party has voluntarily entered into the transactions
contemplated by this Agreement, without duress or coercion.
-14-
<PAGE>
(b) By Executive. The Executive hereby represents and warrants
------------
to the Company that the Executive is not Disabled at the time of the execution
and delivery of this Agreement by the Executive.
14. NON-LIABILITY FOR EXECUTIVE'S DEBTS
Except as provided under Applicable Laws, the Executive's rights and
obligations under this Agreement shall not be subject to encumbrance or to the
claims of the Executive's creditors (other than the Company), or subject to the
debts, contracts or engagements of the Executive or the Executive's heirs,
successors and assigns, and any attempt to do any of the foregoing shall be null
and void ab initio and without force and effect.
15. INTERPRETATION AND CONSTRUCTION
(a) Preparation of Agreement. The parties have participated
------------------------
jointly in the negotiation and drafting of this Agreement and each provision
hereof. In the event any ambiguity, conflict, omission or other question of
intent or interpretation arises, this Agreement shall be construed as if jointly
drafted by the parties, and no presumption or burden of proof shall be presumed,
implied or otherwise construed favoring or disfavoring any party by virtue of
the authorship of this Agreement or of any provision hereof.
(b) Performance on Business Day. In the event the date on which
---------------------------
a party is required to take any action under the terms of this Agreement is not
a business day, the action shall, unless otherwise provided herein, be deemed to
be required to be taken on the next succeeding business day. For purposes of
this section, the term "business day" shall mean Monday through Friday
(excluding any legal holidays).
(c) Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made by any party in connection with any
transaction contemplated by this Agreement shall, irrespective of any
investigation made by or on behalf of any other party hereto, survive the
execution and delivery of this Agreement and the performance or consummation of
any transaction described in this Agreement, and shall continue in full force
and effect forever thereafter (subject to any applicable statutes of
limitation).
(d) Independent Significance. The parties intend that each
------------------------
representation, warranty and covenant shall have independent significance. If
any party has falsely made or breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
falsely made or breached shall not detract from or mitigate the fact that the
party has falsely made or breached the first representation, warranty or
covenant.
(e) Entire Agreement; No Collateral Representations. Each party
-----------------------------------------------
expressly acknowledges and agrees that this Agreement: (i) is the final,
complete and exclusive statement of the agreement of the parties with respect to
the subject matter hereof; (ii) supersede any prior or contemporaneous
agreements, memorandums, proposals, commitments, guaranties, assurances,
communications, discussions, promises, representations, understandings, conduct,
acts, courses of dealing, warranties, interpretations or terms of any kind,
whether oral or written (collectively and
-15-
<PAGE>
severally, the "prior agreements"), and that any such prior agreements are of no
force or effect except as expressly set forth herein; and (iii) may not be
varied, supplemented or contradicted by evidence of prior agreements, or by
evidence of subsequent oral agreements. No prior drafts of this Agreement, and
no words or phrases from any prior drafts, shall be admissible into evidence in
any action or suit involving this Agreement.
(f) Amendment; Waiver; Forbearance. Except as expressly
------------------------------
provided herein, neither this Agreement nor any of the terms, provisions,
obligations or rights contained herein, may be amended, modified, supplemented,
augmented, rescinded, discharged or terminated (other than by performance),
except by a written instrument or instruments signed by all of the parties to
this Agreement. No waiver of: (i) any breach of any term, provision or
agreement; (ii) the performance of any act or obligation under this Agreement;
and/or (iii) any right granted under this Agreement, shall be effective and
binding unless such waiver shall be in a written instrument or instruments
signed by each party claimed to have given or consented to such waiver. Except
to the extent that the party or parties claimed to have given or consented to a
waiver may have otherwise agreed in writing, no such waiver shall be deemed a
waiver or relinquishment of any other term, provision, agreement, act,
obligation or right under this Agreement, or of any preceding or subsequent
breach thereof. No forbearance by a party in seeking a remedy for any
noncompliance or breach by another party hereto shall be deemed to be a waiver
by such forbearing party of its rights and remedies with respect to such
noncompliance or breach, unless such waiver shall be in a written instrument or
instruments signed by the forbearing party.
(g) Remedies Cumulative. The remedies of each party under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which such
party may be lawfully entitled.
(h) Severability. If any term or provision of this Agreement,
------------
or the application thereof to any person or circumstance, shall to any extent be
determined to be invalid, illegal or unenforceable under present or future laws,
then, and in such event: (i) the performance of the offending term or provision
(but only to the extent its application is invalid, illegal or unenforceable)
shall be excused as if it had never been incorporated into this Agreement, and,
in lieu of such excused provision, there shall be added a provision as similar
in terms and amount to such excused provision as may be possible and still be
legal, valid and enforceable; and (ii) the remaining part of this Agreement
(including the application of the offending term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable) shall not be affected thereby, and shall continue in full force
and effect to the fullest legal extent.
(i) Time is of the Essence. Except and to the extent there is a
----------------------
specific cure provision in this Agreement, each party understands and agrees
that: (i) time of performance is strictly of the essence with respect to each
and every date, term, condition, obligation and provision hereof imposed upon
such party; and (ii) the failure to timely perform any of the terms, conditions,
obligations or provisions hereof by such party shall constitute a material
breach and a noncurable (but waivable) default under this Agreement by such
party.
(j) Parties in Interest. Nothing in this Agreement shall confer
-------------------
any rights or remedies under or by reason of this Agreement on any persons other
than the parties hereto and their respective successors and assigns, if any, or
as may be permitted hereunder; nor shall anything in this Agreement relieve or
discharge the obligation or liability of any third person to any party to this
-16-
<PAGE>
Agreement; nor shall any provision give any third person any right of
subrogation or action against any party to this Agreement.
(k) No Reliance Upon Prior Representations. Each party
--------------------------------------
acknowledges that: (1) no other party has made any oral representation or
promise which would induce such party, prior to executing this Agreement, to
change such party's position to his, her or its detriment, to partially perform,
or to part with value in reliance upon such representation or promise; and (2)
such party has not so changed its position, performed or parted with value prior
to the time of the execution of this Agreement, or such party has taken such
action at its own risk.
(l) Rules of Construction. In interpreting the meaning of this
---------------------
Agreement: (i) the term "person" is defined in its broadest sense to include any
individual or natural person, entity (as such term is defined in this subsection
----------
(l)) and/or fiduciary (as such term is defined in this subsection (l)), and
- --- --------------
their respective successors and assigns; (ii) the term "entity" means any legal
entity, including any corporation, association, joint stock company, partnership
(limited, general or limited liability), joint-venture, and limited liability
company, business trust, trust (whether revocable or irrevocable), pension or
profit sharing plan, individual retirement account, or fiduciary or custodial
arrangement; (iii) the term "fiduciary" means any person acting in a fiduciary
capacity, including in their capacity as a trustee or a custodian; (iv) the term
"affiliate" means any person controlling, controlled by, or under common control
with a party (for purposes of the foregoing, the term "control" (including with
the correlative meanings, the terms "controlled by" and "under common control
with") means the possession directly or indirectly of the power to direct or
cause the direction of the management and policies of a person, whether through
the ownership of voting securities or by contract or otherwise); (v) the term
"subsidiary" means any entity in which a party holds a controlling interest;
(vi) the words "herein" and "hereunder" and other words of similar report refer
to this Agreement as a whole, and not to any particular sections, subsections,
paragraph, subparagraph or other subdivision of this Agreement; (vii) the words
"including," "includes," and "include" shall be deemed to be followed by the
words "including without limitation;" (viii) the word "or" shall not be deemed
to be exclusive unless the context indicates otherwise; and (ix) the word "all"
shall be deemed to include the word "any," and vice versa. All pronouns and any
variation thereof used in this Agreement shall be deemed to refer to the
masculine, feminine, or neuter (as the case may be), and to the singular or
plural (as the case may be), as the identity of the person or persons or the
context may require for proper interpretation of this Agreement. Any references
in this Agreement to "dollars" shall be deemed to refer to the currency of the
United States of America, unless such reference specifically references a
dollar-denominated currency of a country other than the United States of
America. The headings used in this Agreement are for convenience and reference
purposes only, and shall not be used in construing or interpreting the scope or
intent of this Agreement or any provision hereof. Each cross-references in this
Agreement shall, unless specifically directed to another agreement or document,
be construed only to refer to provisions within this Agreement, and shall not be
construed to refer to the overall transaction or to any other agreement or
document. Each exhibit, addendum, schedule and/or attachment referenced in this
Agreement shall be construed to be incorporated into this Agreement by such
reference and made a part hereof. References to any agreements (other than this
Agreement) shall include all amendments, modifications, supplements and/or
renewals thereof. Unless the context requires otherwise: (1) any reference
herein to any federal, state, local or foreign statutes or laws (collectively,
the "Statutes") will be deemed to include all rules and regulations promulgated
thereunder: and (2) any references herein to any Statute and/or any specific
section or provision of any such Statute are intended to refer to such section
or provision thereof as presently enacted and as subsequently amended,
succeeded, recodified or renumbered.
-17-
<PAGE>
16. ENFORCEMENT
(a) Governing Law. This Agreement and the rights and remedies
-------------
of each party arising out of or relating to this Agreement (including equitable
remedies) shall be solely governed by, interpreted under, and construed and
enforced in accordance with the laws (without regard to the conflicts of law
principles) of the Province of Alberta, as if this Agreement were made, and as
if its obligations were to be performed in their entirety, within the Province
of Alberta.
(b) Recovery of Fees and Costs. If any party institutes, or
--------------------------
should any party otherwise become a party to, any action or proceeding based
upon or arising out of this Agreement, including the enforcement or
interpretation of this Agreement or any provision hereof, or for damages by
reason of any alleged breach of this Agreement or any provision hereof, or for a
declaration of rights in connection herewith, or for any other relief, including
equitable relief, in connection herewith, the "prevailing party" (as such term
is defined below) in any such action or proceeding, whether or not such action
or proceeding proceeds to final judgment or determination, shall be entitled to
receive from the non-prevailing party as a cost of suit, and not as damages, all
fees, costs and expenses of enforcing any right of the prevailing party
(collectively, "fees and costs"), including: (i) reasonable attorneys' fees and
costs and expenses; (ii) witness fees (including experts engaged by the parties,
but excluding officers, directors, employees, managers or general partners of
the parties); (iii) accountants' fees; (iv) fees of other professionals and (v)
any and all other similar fees incurred in the prosecution or defense of the
action or proceeding; including the following: (1) postjudgment motions; (2)
contempt proceedings; (3) garnishment, levy, and debtor and third party
examinations; (4) discovery and (5) bankruptcy litigation. All of the aforesaid
fees and costs shall be deemed to have accrued upon the commencement of such
action, and shall be paid whether or not such action is prosecuted to judgment.
Any judgment or order entered in such action shall contain a specific provision
providing for the recovery of the aforesaid fees, costs and expenses incurred in
enforcing such judgment and an award of prejudgment interest from the date of
the breach at the maximum rate of interest allowed by law. The term "prevailing
party" is defined as the party who is determined to prevail by the court after
its consideration of all damages and equities in the action or proceeding (the
court shall retain the discretion to determine that no party is the prevailing
party, in which case no party shall be entitled to recover its fees and costs
under this subsection (b)).
---------- ---
17. ASSIGNMENT AND DELEGATION; SUCCESSORS AND ASSIGNS.
(a) Assignment or Delegation. Except as specifically provided
------------------------
in this Agreement, neither party (an "assigning party") may directly or
indirectly sell, license, transfer or assign (whether through a merger,
consolidation, conversion, sale of assets, sale or exchange of securities, or by
operation of law, or otherwise) any of such party's rights or interests under
this Agreement, or delegate any of such party's duties or obligations under this
Agreement, in whole or in part, including to any subsidiary or to any affiliate,
without the prior written consent of the other party (a "consenting party"),
which consent may be withheld in the consenting party's sole and absolute
discretion; provided, however:
(i) Subject to prior compliance with subsection (iii) and
----------------
subsection (iv) below, an assigning party may assign all of the rights and
- ---------------
interests and delegate all of the duties and obligations of the assigning party
under this Agreement in connection with a transaction whose principal purpose is
to change the State in which the assigning party is incorporated, or to form a
holding company, or to effect a similar reorganization as to form of entity
without change
-18-
<PAGE>
of beneficial ownership, including through: (1) a merger or consolidation or
stock exchange or divisive reorganization (i.e., spin-off, split-off or split-
up) or other reorganization with respect to the assigning party and/or its
stockholders; or (2) the sale, transfer, exchange or other disposition by the
assigning party of its assets in a single or series of related transactions,
so long as such transferee, purchaser or surviving person shall expressly
assume such obligations of the assigning party;
(ii) Subject to subsection (iii) and subsection (iv) below, an
---------------- ---------------
assigning party may, with the prior written consent of the consenting party,
which consent the consenting party may withhold in its sole and absolute
discretion, assign all of the rights and interests and delegate all of the
duties and obligations of the assigning party under this Agreement to any
other person in connection with the transfer or sale of the entire business of
the assigning party (other than with respect to a sale described in subsection
----------
(i) above), or the merger or consolidation of the assigning party with or into
---
any other person (other than with respect to a merger or consolidation
described in subsection (i) above), so long as such transferee, purchaser or
--------------
surviving person shall expressly assume such obligations of the assigning
party;
(iii) Notwithstanding anything in subsection (i) or subsection (ii)
-------------- ---------------
above to the contrary, no assignment or transfer under subsection (i) or
--------------
subsection (ii) may be effectuated unless the proposed transferee or assignee
---------------
first executes such agreements (including a restated employment agreement) in
such form as the consenting party may deem reasonably satisfactory to: (1)
evidence the assumption by the proposed transferee or assignee of the
obligations of the assigning party; and (2) to ensure that the consenting
party continues to receive such rights, benefits and protections (both legal
and economic) as were contemplated by the consenting party when entering into
this Agreement; and
(iv) Notwithstanding anything in subsection (i) or subsection (ii)
-------------- ---------------
above to the contrary: (1) any assumption by a successor or assign under
subsection (i) or subsection (ii) above shall in no way release the assigning
-------------- ---------------
party from any of its obligations or liabilities under this Agreement; and (2)
and any merger, consolidation, reorganization, sale or conveyance under
subsection (i) or subsection (ii) above shall not be deemed to abrogate the
-------------- ---------------
rights of the consenting party elsewhere contained in this Agreement,
including those resulting from a Change In Control.
Any purported assignment or transfer in violation of the terms of this
subsection (ii) shall be null and void ab initio and of no force and effect, and
- ---------------
shall vest no rights or interests in the purported assignee or transferee.
(b) Successors and Assigns. Subject to subsection (b) above, each and
---------------------- --------------
every representation, warranty, covenant, condition and provision of this
Agreement as it relates to each party hereto shall be binding upon and shall
inure to the benefit of such party and his, her or its respective successors and
permitted assigns, spouses, heirs, executors, administrators and personal and
legal representatives, including any successor (whether direct or indirect, or
by merger, consolidation, conversion, purchase of assets, purchase of securities
or otherwise).
-19-
<PAGE>
18. MISCELLANEOUS
(a) Costs and Expenses. Except as expressly set forth in this
------------------
Agreement, each party shall pay all legal and other fees, costs and expenses
incurred or to be incurred by such party in negotiating and preparing this
Agreement; in performing due diligence or retaining professional advisors; and
in complying with such party's covenants, agreements and conditions contained
herein.
(b) Cooperation. Each party agrees, without further consideration, to
-----------
cooperate and diligently perform any further acts, deeds and things, and to
execute and deliver any documents that may be reasonably necessary or otherwise
reasonably required to consummate, evidence, confirm and/or carry out the intent
and provisions of this Agreement, all without undue delay or expense.
(c) Notices. Unless otherwise specifically provided in this
-------
Agreement, all notices, demands, requests, consents, approvals or other
communications (collectively and severally called "notices") required or
permitted to be given hereunder, or which are given with respect to this
Agreement, shall be in writing, and shall be given by: (i) personal delivery
(which form of notice shall be deemed to have been given upon delivery), (ii) by
telegraph or by private airborne/overnight delivery service (which forms of
notice shall be deemed to have been given upon confirmed delivery by the
delivery agency), (iii) by electronic or facsimile or telephonic transmission,
provided the receiving party has a compatible device or confirms receipt thereof
(which forms of notice shall be deemed delivered upon confirmed transmission or
confirmation of receipt), or (iv) by mailing in the United States mail by
registered or certified mail, return receipt requested, postage prepaid (which
forms of notice shall be deemed to have been given upon the fifth {5th} business
day following the date mailed. Notices shall be addressed at the addresses first
set forth below, or to such other address as the party shall have specified in a
writing delivered to the other parties in accordance with this paragraph. Any
notice given to the estate of a party shall be sufficient if addressed to the
party as provided in this subsection (c).
--------------
If to the Company: Pinnacle Oil International, Inc.
840 - 7/th/ Avenue, SW, Suite 750
Calgary, Alberta, Canada T2P 3G2
If to Executive: Daniel C. Topolinsky
321 Roxboro Road S.W.
Calgary, AB T2S 0R3
(d) Counterparts; Electronically Transmitted Documents. This
--------------------------------------------------
Agreement may be executed in counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument, binding on all parties hereto. Any signature page of this Agreement
may be detached from any counterpart of this Agreement and reattached to any
other counterpart of this Agreement identical in form hereto by having attached
to it one or more additional signature pages. If a copy or counterpart of this
Agreement is originally executed and such copy or counterpart is thereafter
transmitted electronically by facsimile or similar device, such facsimile
document shall for all purposes be treated as if manually signed by the party
whose facsimile signature appears.
(e) Execution by All Parties Required to be Binding. This Agreement
-----------------------------------------------
shall not be construed to be an offer and shall have no force and effect until
this Agreement is fully executed and delivered by all parties hereto pursuant to
the terms of section18(d). Until such time as all parties fully
------------
-20-
<PAGE>
execute this Agreement, any party who has previously executed and delivered this
Agreement may revoke such execution and delivery.
WHEREFORE, the parties hereto have executed this Agreement in the City
of Calgary, Province of Alberta, Canada, as of the date first set forth above.
COMPANY: Pinnacle Oil International, Inc.
a Nevada Corporation
By: /s/ George Liszicasz
---------------------------
George Liszicasz, Chief Executive Officer
EXECUTIVE: /s/ Daniel C. Topolinsky
---------------------------
Daniel C. Topolinsky
-21-
<PAGE>
EXHIBIT 4.8
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement"), dated effective as
of July 1, 1999, is entered into by and between Pinnacle Oil International,
Inc., a Nevada corporation (the "Company") and James R. Ehrets (the
"Executive"), with reference to the following facts:
RECITALS:
--------
WHEREAS, the Company desires to employ the Executive as its Executive Vice
President of Operations in order to enable the Company to avail itself of the
skill, knowledge and experience of the Executive and to assure the successful
management of the Company, and the Executive desires to become employed in such
executive officers position or positions;
WHEREAS, the Company and the Executive desire to enter into a written
employment agreement formally documenting their relationship and setting forth
the duties and responsibilities the Company desires the Executive to undertake,
and which the Executive has agreed to undertake.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for valuable consideration, the receipt and sufficiency of
which are hereby mutually acknowledged, the parties to this Agreement
(collectively "parties" and individually a "party") agree as follows:
AGREEMENT:
---------
1. DEFINITIONS
Set forth below are definitions of capitalized words or terms which
(together with those common words and terms set forth in section 16(l)) are
-------------
generally used throughout this Agreement, or references to sections or
paragraphs containing those definitions (capitalized terms used only in a
specific section or paragraph of this Agreement are defined in that section or
paragraph):
(a) "Advance" is defined in section 10.
(b) "Affiliate" means any "Person" (as defined below) controlling,
controlled by, or under common control with a party.
(c) "Agreement" means this Agreement, as originally executed and as
it may be: (i) amended, modified, supplemented and/or restated from time to time
(but only to the extent amended, modified, supplemented and/or restated in
accordance with the terms of this Agreement); and/or (ii) renewed or extended in
accordance with its terms.
(d) "Applicable Laws" means any federal (both of the United States
and Canada), state, provincial local or foreign laws or regulations as may be
applicable.
(e) "Board" means the Board of Directors of the Company, as such body
may be reconsti from time to time.
(f) "Change In Control" shall mean the occurrence of any of the
following events:
(i) A "Control Acquisition" by an "Acquiring Person" pursuant
to which Acquiring Person attains, by reason of and immediately after a
transaction or series of related
<PAGE>
transactions, "Beneficial Ownership" of fifty percent (50%) or more of the
"Total Combined Voting Power" of the Company's then outstanding "Voting
Securities." The terms in quotations in the immediately preceding sentence
shall, for purposes of this Agreement, have the following meanings:
(1) "Acquiring Person" shall mean any "Person" which
acquires the defined percentage of securities, with the exception of:
(A) any Employee Benefit Plan (or a trust forming a part thereof)
maintained by the Company, or by any corporation or entity in which
the Company holds fifty percent (50%) or more of the "Voting
Securities" (each, a "Controlled Subsidiary"); (B) the Company or any
Controlled Subsidiary; or (C) any "Person" which acquires the
threshold percentage of "Voting Securities" through a "Non-Control
Transaction" (as defined below).
(2) "Non-Control Transaction" shall mean any transaction
in which the stockholders of the Company immediately before such
transaction, directly or indirectly own immediately following such
transaction at least a majority of the "Total Combined Voting Power"
of the outstanding "Voting Securities" of the surviving corporation
(or other entity) resulting from such transaction, in substantially
the same proportion as such stockholders' ownership of the Company's
"Voting Securities" immediately before such transaction.
(3) "Person," "Beneficial Ownership," "Total Combined
Voting Power" and "Voting Securities" shall have the meanings ascribed
to such terms in Sections 13(d) and 14(d) of the Securities Exchange
Act and Rule 13d-3 promulgated thereunder.
Notwithstanding any other provision of this subsection
----------
(f)(i), a Change in Control shall not be deemed to have occured solely
------
because any Person acquired Beneficial Ownership of more than the threshold
percentage of the outstanding Voting Securities as a result of an
acquisition of Voting Securities by the Company (each, a "Redemption")
which, by reducing the number of Voting Securities outstanding, increased
the percentage of outstanding Voting Securities Beneficially Owned by such
Person; provided, however, that if (A) a Change In Control would occur as a
result of a Redemption but for the operation of this sentence, and (B)
after such Redemption, such Person becomes the Beneficial Owner of any
additional Voting Securities, which increase the percentage of the then
outstanding Voting Securities Beneficially Owned by such Person over the
percentage owned as a result of the Redemption, then a Change In Control
shall be deemed to have occurred.
(ii) During any period of three (3) consecutive years after the
date of this Agreement, the individuals who constituted the Board at the
beginning of such period (the "Incumbent Board") cease to constitute a
majority of the Board, for any reason(s) other than (1) the voluntary
resignation of one or more Board members; (2) the refusal by one or more
Board members to stand for election to the Board; and/or (3) the removal of
one or more Board members for good cause; provided, however, (A) that if
the nomination or election of any new director of the Company was approved
by a vote of at least a majority of the Incumbent Board, such new director
shall be deemed a member of the Incumbent Board; and (B) that no individual
shall be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11
-2-
<PAGE>
promulgated under the Securities Exchange Act of 1934), or as a result of a
solicitation of proxies or consents by or on behalf of an Acquiring Person,
other than a member of the Board (a "Proxy Contest"), or as a result of any
agreement intended to avoid or settle any Election Contest or Proxy
Contest.
(iii) The Board or the stockholders of the Company approve:
(1) A merger or consolidation or reorganization of the
Company reorganization (each, a "Major Event") with (A) any Controlled
Subsidiary, and the terms of the proviso to this subsection (f)(iii)
-------------------
are not satisfied; or (B) any other corporation or other entity;
unless such Major Event is a Non-Control Transaction; or
(2) A complete liquidation or dissolution of the Company,
and the terms of the proviso to subsection (f)(iii) are not satisfied;
-------------------
or
(3) An agreement for the sale or other disposition of all
or substantially all of the assets of the Company to any Controlled
Subsidiary, and the terms of the proviso to subsection (f)(iii) are
-------------------
not satisfied.
Notwithstanding any other provision of this subsection
----------
(f)(iii), if the Executive or an Affiliate of the Executive who is then
--------
a stockholder or director of the Company, either: (i) expressly voted in
favor of the transaction constituting the Change In Control in such
Person's capacity as either a stockholder or as a director of the Company;
or (ii) expressly abstained from voting (other than by reason of an
"interest" in a matter or transaction, as defined in the Nevada Revised
Statutes); and/or (iii) failed or refused to vote, then the transaction
shall not constitute a Change in Control.
(g) "Company" means Pinnacle Oil International, Inc., a Nevada
Corporation, and any successor and assign of the Company, as more particularly
described in, or permitted and prescribed pursuant to, section 18(a).
-------------
(h) "Disability" (or the related term "Disabled") means any of the
following: (i) the receipt of any disability insurance benefits by the
Executive; (ii) a declaration by a court of competent jurisdiction that the
Executive is legally incompetent; (iii) the Executive's material inability due
to medically documented mental or physical illness or disability to fully
perform the Executive's regular obligations of his office and as an employee of
the Company (with reasonable accommodations for such disability, if then
required by Applicable Law), for a six (6) month continuous period, or for nine
(9) cumulative months within any one (1) year continuous period; or (iv) the
reasonable determination by the Board that the Executive will not be able to
fully perform the Executive's regular obligations of his office and as an
employee of the Company (with reasonable accommodations if then required by
Applicable Law) for a six (6) month continuous period. If the Board determines
that the Executive is Disabled under clause (iv) above, and the Executive
-----------
disagrees with the conclusion of the Board, then the Company shall engage a
qualified independent physician reasonably acceptable to the Executive to
examine the Executive at the Company's sole expense. The determination of such
physician shall be provided in writing to the parties and shall be final and
binding upon the parties for all purposes of this Agreement. The Executive
hereby consents to examination in the manner
-3-
<PAGE>
set forth above, and waives any physician-patient privilege arising from any
such examination as it relates to the determination of the purported disability.
(i) "Employee Benefit Plan" is defined in section 4(c).
------------
(j) "Employee Deductions" are defined in section 7.
---------
(k) "Monthly Salary" is defined in section 4(a).
------------
(l) "Performance Bonus" is defined in section 4(b).
------------
(m) "Person" (other than for purposes of determining a Change in
Control) means an individual or natural person, a corporation, partnership
(limited or general), joint-venture, association, business trust, limited
liability company/partnership, business trust, trust (whether revocable or
irrevocable), pension or profit sharing plan, individual retirement account, or
fiduciary or custodial arrangement.
(n) "Personal Time-Off" is defined in section 8.
---------
(o) "Subsidiary" shall mean any corporation, partnership (limited or
general), joint-venture, association, business trust, limited liability
company/partnership, business trust or trust in which the Company holds a
controlling interest, including but not limited to Pinnacle Oil, Inc., a Nevada
corporation ("Pinnacle Oil"), and Pinnacle Oil Canada, Inc., a British Columbia
corporation ("Pinnacle Canada").
(p) "Termination By Company For Cause" means a termination of the
Executive caused by a determination of two-thirds of the Board, excluding the
Executive if then a member of the Board, that one of the following events has
occurred:
(i) Any of the Executive's representations or warranties in
this Agreement is not materially true, accurate and/or complete;
(ii) The Executive has intentionally and continually breached
or wrongfully failed and/or refused to fulfill and/or perform (A) any of
the Executive's material obligations, promises or covenants under this
Agreement, or (B) any of the material warranties, obligations, promises or
covenants in any agreement (other than this Agreement) entered into between
the Company and the Executive, without cure, if any, as provided in such
agreement;
(iii) The Executive has intentionally failed and/or refused to
obey any lawful and proper order or directive of the Board, and/or the
Executive has intentionally interfered with the compliance by other
employees of the Company with any such orders or directives;
(iv) The Executive has intentionally breached the Executive's
fiduciary duties to the Company;
(v) The Executive has intentionally caused the Company to be
convicted of a crime, or to incur criminal penalties in material amounts;
-4-
<PAGE>
(vi) The Executive has committed: (A) any act of fraud,
misrepresentation, theft, embezzlement or misappropriation, and/or any
other dishonest act against the Company and/or any of its Affiliates,
subsidiaries, joint ventures; or (B) any other offense involving moral
turpitude, which offense is followed by conviction or by final action of
any court of law; or (C) a felony;
(vii) The Executive repeatedly and intemperately used alcohol
or drugs, to the extent that such use (A) interfered with or is likely to
interfere with the Executive's ability to perform the Executive's duties,
and/or (B) endangered or is likely to endanger the life, health, safety, or
property of the Executive, the Company, or any other person;
(viii) The Executive has intentionally demonstrated or committed
such acts of racism, sexism or other discrimination as would tend to bring
the Company into public scandal or ridicule, or could otherwise result in
material and substantial harm to the Company's business, reputation,
operations, affairs or financial position; and/or
(ix) The Executive engaged in other conduct constituting legal
cause for termination.
No act, nor failure to act, on the Executive's part shall be
considered "intentional" unless the Executive has acted, or failed to act, with
a lack of good faith and with a lack of reasonable belief that the Executive's
action or failure to act was in the best interests of the Company. In the event
the Executive is both Disabled and the provisions of clause (vii) of this
------------
subsection (p) are applicable, the Company shall nevertheless have the right to
- --------------
deem such event as a Termination By Company For Cause.
(q) Termination By Executive For Good Reason" means the Executive's
termination of this Agreement based on his reasonable determination that one of
the following events has occurred:
(i) Any of the Company's representations or warranties in this
Agreement is not materially true, accurate and/or complete;
(ii) The Company intentionally and continually breached or
wrongfully failed to fulfill or perform (A) its material obligations,
promises or covenants under this Agreement; or (B) any material warranties,
obligations, promises or covenants of the Company in any agreement (other
than this Agreement) entered into between the Company and the Executive,
without cure, if any, as provided in such agreement;
(iii) The Company terminated this Agreement and the Executive's
employment hereunder (with the exception of Treasurer), and such
termination does not constitute Termination By Company For Cause;
(iv) Without the consent of the Executive, the Company: (A)
substantially altered or materially diminished the position, nature,
status, prestige or responsibilities of the Executive from those in effect
by mutual agreement of the parties from time-to-time; (B) assigned
additional duties or responsibilities to the Executive which were wholly
and clearly inconsistent with the position, nature, status, prestige or
responsibilities of the Executive then in effect; or (C) removed or failed
to reappoint or re-elect the Executive to the Executive's offices
-5-
<PAGE>
under this Agreement (as they may be changed or augmented from time-to-time
with the consent of the Executive), or as a director of the Company, except
in connection with the Disability of the Executive;
(v) Without the consent of the Executive, the Company
relocated the Company's principal operating offices from their present
location, and as a result increased the Executive's ordinary commute from
the Executive's temporary residence by more than thirty-five (35) miles;
(vi) Without the consent ratification (express or implied) of
the Executive, the Executive was removed from the Board without his
consent; or the Company failed to nominate or reappoint the Executive to
the Board (unless the Executive is deceased or Disabled, or such removal or
failure is attributable to an event which would constitute Termination By
Company For Cause), or if the Executive was so nominated, the stockholders
of the Company failed to re-elect the Executive to the Board;
(vii) The Company intentionally required the Executive to commit
or participate in any felony or other serious crime; and/or
(viii) The Company engaged in other conduct constituting legal
cause for termination.
In the event any of the events described above in this subsection (q)
--------------
occurs, and such event is reasonably susceptible of being cured, the Company
shall be entitled to a grace period of thirty (30) days following receipt of
written notice of such event. If the Executive determines, in his sole
discretion, that such event is not reasonably susceptible of being cured within
a period of thirty (30) days), the Executive may grant a longer cure period to
the Company to cure such event to the reasonable satisfaction of the Executive,
provided the Company promptly commences and diligently pursues such cure. The
noted grace periods shall not apply to any other event described in this
subsection (q).
- --------------
2. EMPLOYMENT OBLIGATIONS
(a) Engagement; Duties. The Company hereby engages the Executive as
------------------
its Executive Vice President of Operations, and the Executive accepts such
position, upon the terms and conditions set forth herein. As the Company's
Executive Vice President of Operations, the Executive shall do and perform all
services, acts, or things necessary or advisable to discharge his duties as the
Company's Executive Vice President of Operations under this Agreement and the
Company's Bylaws including, but not limited to, the following:
(i) Planning, managing, conducting and supervising the day-to-
day SFD survey and SFD interpretation operations of the Company (and/or its
Subsidiaries), including the geological, geophysical, scientific,
information systems, computer and aviation operational staff associated
with such operations; and
(ii) Acting as the Company's liaison with its joint venture
and survey partners in connection with the Company ongoing projects for
such partners.
-6-
<PAGE>
The Executive shall report only to the Company's Chief Executive
Officer and the Board, and any significant employment decisions and/or
agreements, contracts and/or joint ventures negotiated by the Executive shall be
subject to the review and approval/ratification of the Board. The Executive's
responsibilities with respect to the Company and each of its Subsidiaries may be
changed or supplemented by the Board from time-to-time, in their discretion.
The Executive shall also hold such offices with the Subsidiaries and/or joint
ventures of the Company as the Board may, in its discretion and with the consent
of the Executive, from time-to-time determine. The Board shall determine the
amount of the Executive's total remuneration which will be allocated to and paid
by the Company and by each of its Subsidiaries. The Executive shall be
reasonably available to travel as the needs of the Company's business may
require. The Executive agrees to cooperate with and work to the best of his
ability with the Company's (and/or its Subsidiaries') management team, which
includes the Board and the executive officers, and to continually improve the
Company's (and/or its Subsidiaries') reputation in its industry.
(b) Performance. The Executive shall devote the Executive's entire
-----------
and undivided business time, energy, abilities and attention solely and
exclusively to the performance of the Executive's duties hereunder and the
business of the Company (and/or its Subsidiaries); provided, however, the
foregoing shall not be construed to prohibit the Executive from attending to
personal matters from time-to-time as needed during business hours to the extent
reasonably necessary to address such matters. The Executive shall at all times
faithfully, loyally, conscientiously, diligently and, to the best of the
Executive's ability, perform all of the Executive's duties and obligations under
this Agreement, and otherwise promote the interests and welfare of the Company
(and/or its Subsidiaries), all consistent with the highest and best standards of
the Company's industry. The Executive: (i) shall strictly comply with and adhere
to all Applicable Laws, and the Company's Articles of Incorporation, Bylaws and
policies; (ii) shall obey all reasonable rules and regulations and policies now
in effect or as subsequently modified governing the conduct of employees of the
Company, and (iii) shall not commit any acts of gross negligence, willful
misconduct, dishonesty, fraud or misrepresentation, racism, sexism or other
discrimination, or any other acts which would tend to bring the Company (and/or
its Subsidiaries) into public scandal or ridicule, or would otherwise result in
material harm to the Company's business or reputation.
(c) Facilities and Services. The Company (and/or its Subsidiaries)
-----------------------
shall provide such support staff, facilities, equipment and supplies as are
reasonably necessary or suitable for the adequate performance of the Executive's
duties and obligations under this Agreement, including technical and secretarial
help.
3. TERM
(a) Initial Term. The Company hereby employ the Executive pursuant to
------------
the terms of this Agreement, and the Executive hereby accepts such employment
with the Company, for the period beginning on the date of this Agreement and
ending on April 30, 2004 (the "Initial Term").
(b) Automatic Renewal; Termination by the Company. Unless this
---------------------------------------------
Agreement is previously terminated by either party as provided in section 11
----------
below, this Agreement will be automatically renewed for additional and
consecutive one (1) year terms (each, a "Renewal Term") following the expiration
of each Initial or Renewal Term, (each a "Term"), unless either party gives
------
written notice to the other party, no later than sixty (60) days prior to the
expiration of the then pending Term, of its election not to automatically renew
this Agreement for an additional year.
-7-
<PAGE>
4. COMPENSATION
(a) Monthly Base Salary. The Company shall pay or caused to be paid
-------------------
to the Executive a monthly base salary of twenty thousand Canadian dollars (CDN
$20,000) (the "Monthly Salary"). The Monthly Salary shall be payable in
periodic installments as agreed from time-to-time by the Executive and the
Board, but at least semi-monthly, and shall be subject to any Tax Withholdings
and/or Employee Deductions that are applicable. In any pay period in which the
Executive shall be employed for less than the entire number of business days in
such pay period, the Monthly Salary for such pay period shall be prorated on the
basis of the number of business days during which the Executive was actually
employed during such pay period, divided by the actual number of business days
in such pay period. Commencing on the first annual anniversary date of this
Agreement, and on each annual anniversary date thereafter, the Monthly Salary
then effective shall be increased by an amount equal to five percent (5%) of the
Monthly Salary for the immediately prior year. Additionally, commencing on or
prior to the first annual anniversary date of this Agreement, and on or prior to
each annual anniversary date thereafter, the Board shall review the Executive's
Monthly Salary to determine whether to increase the Monthly Salary by an amount
in excess of said five percent (5%) increment, without any obligation by the
Board to authorize such increase.
(b) Performance Bonus. The Board shall from time-to-time, but not
-----------------
less than one (1) time per year, evaluate the performance of the Executive and
award to the Executive a performance bonus (the "Performance Bonus") in such
amount as the Board may determine, in its sole discretion, to be reasonable,
after taking into consideration other compensation paid or payable to the
Executive under this Agreement, as well as the financial and non-financial
progress of the business of the Company (and/or its Subsidiaries) and the
contributions of the Executive toward that progress. Payment of the Performance
Bonus shall be subject to any applicable Tax Withholdings and/or Employee
Deductions.
(c) Participation in Employee Benefit Plans. The Executive shall have
---------------------------------------
the same rights, privileges, benefits and opportunities to participate in any
employee benefit plans of the Company which may now or hereafter be in effect on
a general basis for the Company's executive officers or employees, including
without limitation retirement, pension, profit-sharing, savings and insurance
(including, but not limited to, health, dental, disability and/or group
insurance) (collectively, "Employee Benefit Plans").
(d) Stock Options.
-------------
(i) The Company agrees to grant to the Executive an option
(the "First Option") to purchase up to three hundred thousand (300,000)
unregistered shares of the Company's common stock, which right to purchase shall
vest in equal increments over a period of four (4) years based upon continuous
employment, with the first increment of eighty-five thousand (85,000) shares
vesting one year from the date of this Agreement, the second increment of ninety
thousand (90,000) shares vesting two years from the date of this Agreement; the
third increment of ninety-five thousand (95,000) shares vesting three years from
the date of this Agreement, and the fourth increment of thirty thousand (30,000)
shares vesting four years from the date of this Agreement The purchase price per
share shall be U.S. $14 per share.
(ii) The Company agrees to grant to the Executive an option
(the "Second Option") to purchase up to two hundred thousand (200,000)
unregistered shares of the Company's common stock, which right to purchase shall
vest in equal increments over a period of five (5) years
-8-
<PAGE>
based upon continuous employment, with the first increment of seventy-five
thousand (75,000) shares vesting four year from the date of this Agreement, and
the second increment of one hundred twenty-five thousand (125,000) shares
vesting five years from the date of this Agreement. The purchase price per share
shall be the closing sales price for the Company's common stock as quoted by the
NASD Electronic Bulletin Board (or any replacement market or exchange) on April
30, 2001.
(iii) The Company agrees, so long as it is a reporting company,
to use its best efforts to register the options shares under an S-8 Registration
Statement.
(iv) The term for the Executive to exercise the First Option or
Second Option (collectively, the "Option") with respect to any vested share
shall expire five (5) years from the date of vesting of such share provided,
however, if the Executive's employment with the Company has been previously
terminated pursuant to section (vi) below, the expiration date shall be
------------
accelerated to two (2) years after the effective date of termination
(if earlier than the option expiration date) .
(v) In the event of the death or Disability of the Executive,
all unvested Options Shares which would have vested within the twelve (12) month
--------
period following the date of death or Disability will vest effective as of the
date of death or Disability, and the prospective right to purchase the balance
of the remaining unvested option shares shall lapse.
--------
(vi) In the event the Executive's employment with the Company
is terminated, and such termination is attributable to (A) an event defined as
Termination By Company for Cause; and/or (B) termination by the Executive which
does not constitute Termination By Executive For Good Reason; then the
---
prospective right to purchase unvested option shares shall lapse to the extent
--------
such rights do not vest prior to the effective date of termination.
(vii) In the event the Executive's employment with the Company
is terminated, and such termination is attributable to (A) an event defined as a
Termination by Executive for Good Reason; (B) termination by the Company which
does not constitute a Termination By Company for Cause and/or (C) an event
defined as a Change in Control; then the prospective right to purchase all
unvested options shares which would have vested within the twelve (12)
- --------
month period following the date of such event will vest effective as of the date
of such event, and the prospective right to purchase the balance of the
remaining unvested option shares shall lapse.
--------
(viii) The grant of the Options shall be evidenced by a Stock
Option Certificate reflecting the above terms plus such additional terms and
conditions as required by a Plan established by the Company and containing such
other terms as the Company believes to be reasonable.
(ix) The Executive shall be responsible for all income taxes
(including tax withholdings) attributable to the grant or exercise of the
Option, or the sale of the option shares acquired by exercise of the Option.
5. MOVING EXPENSES
The Company (and/or its Subsidiaries) shall directly pay or reimburse
the Executive for his or her payment of the Executive's reasonable and necessary
moving expenses, duly and actually
-9-
<PAGE>
incurred by the Executive in connection with the move of the Executive's
household furnishings, belongings and automobiles to Calgary in connection with
his employment with the Company.
6. BUSINESS EXPENSES
During the Term of this Agreement the Executive is authorized to
incur, and the Company (and/or its Subsidiaries) shall directly pay or reimburse
the Executive for his or her payment of the Executive's reasonable and necessary
business expenses, duly and actually incurred by the Executive in connection
with the duties and services to be performed by the Executive under this
Agreement, including without limitation entertainment, meals, travel, lodging
and other similar out-of-pocket expenses, upon the Executive's submission to the
Company (and/or its Subsidiaries) of itemized expense statements setting forth
the date, purpose and amount of the expense incurred, together with
corresponding receipts showing payment by the Executive in cases where he or she
seeks reimbursement, all in conformity with business expense payment and/or
reimbursement policies as may be established by the Company (and/or its
Subsidiaries) from time to time, all of which shall comply with the
substantiation requirements of the Internal Revenue Code of 1986, as amended,
and the Income Tax Act of Canada, as amended, and any other applicable taxing
authorities, and regulations promulgated by such authorities thereto, pertaining
to the deductibility of such expenses. Direct payment and/or reimbursement
shall be made by the Company (and/or its Subsidiaries) no later than thirty (30)
days of the Executive submission of the foregoing documentation. The Executive
shall be entitled to direct payment and/or reimbursement in full for the
aforesaid business expenses, notwithstanding that the Company is prohibited
under the Code and/or regulations promulgated thereunder from deducting the
entire amount of such expenses. The Company (and/or its Subsidiaries) shall
have the option to pay directly the persons entitled to payment for such
business expenses.
7. TAX WITHHOLDINGS AND EMPLOYEE DEDUCTIONS
The Company (and/or its Subsidiaries) shall be entitled to deduct from
any payments to the Executive pursuant to the terms of this Agreement (including
any payments arising from the early termination of this Agreement), amounts
sufficient to cover applicable federal (United States and Canada), state,
provincial, local and/or foreign income tax withholdings and/or deductions as
may be required in connection with such payment, including without limitation
old-age and survivor's and other social security payments, state disability and
other withholdings payment as may be required by law (collectively, the "Tax
Withholdings"), as well as all other elective employee deductions applicable to
such payment such as, for example, deductions relating to any Employee Benefit
Plan in which the Executive participates (collectively, the "Employee
Deductions").
8. PERSONAL TIME-OFF
The Executive shall be entitled each calendar year during the term of
this Agreement to such number of personal time-off days for such purposes,
including vacations and time for personal affairs ("Personal Time-Off") as are
approved by the Board, but not less than the greater of (i) fifteen (15)
business days, or (ii) the number of personal time-off days (including vacation
and personal days) generally given by the Company to its employees. Personal
Time-Off shall be in addition to regular paid legal holidays provided to all
employees of the Company. The Executive's compensation shall be paid in full
with respect to approved Personal Time-Off days. Should the Executive fail to
use all Personal Time-Off days in any calendar year, the Executive shall have
the option of (i) receiving payment for such days on a pro rata basis,
-10-
<PAGE>
or (ii) "carrying-over" unused Personal Time-Off days to succeeding years.
Personal time-off shall be taken during a period or periods mutually
satisfactory to both the Company and the Executive.
9. INSURANCE
If requested by the Company, the Executive shall submit to such
physical examinations and otherwise take such actions and execute and deliver
such documents as may be reasonably necessary to enable the Company, at its
expense and for its own benefit, to obtain disability and/or life insurance on
the life of the Executive. The Executive represents and warrants that he has no
reason to believe that he is not insurable for disability or life coverage with
a reputable insurance company at rates now prevailing in the city of the
Company's principal executive offices, for healthy persons of the Executive's
own age and gender.
10. ADVANCES
The Company (and/or its Subsidiaries) may from time-to-time, upon
written consent from the Chairman of the Board or the Board, and without any
obligation to do so, make advances to the Executive against any compensation or
other amounts to be paid by the Company (and/or its Subsidiaries) to the
Executive (each, an "Advance"). Any amounts due hereunder to the Executive
shall, at the election of the Company, be offset by any then outstanding
Advances.
Subject to the terms of any written agreement relating to Advances, in
the event of termination of employment of executive, the Executive agrees that
the Company (and/or its Subsidiaries) shall have the right to offset the amount
of any and all outstanding Advance(s) against any salary or wages due, or any
other amounts due to the Executive from the Company, and that any remaining
balance of the Advance(s) shall be repaid by the Executive within thirty (30)
days after the Executive's termination date. If such Advance(s) are not repaid
within said thirty (30) days, simple interest shall accrue on the unpaid balance
at the rate of ten percent (10%) per annum. The Executive agrees to pay all
costs of collection incurred by the Company (and/or its Subsidiaries) with
respect thereto, including reasonable attorneys' fees and legal costs.
The Company's obligation to make payments to the Executive hereunder
shall not, except with respect to Advance(s) as provided above, be affected by
any circumstance, including without limitation any set-off, counterclaim,
recoupment, defense or other right which the Company (and/or its Subsidiaries)
may have against the Executive or others.
11. TERMINATION OF AGREEMENT BEFORE EXPIRATION OF TERM
(a) Death or Disability. Notwithstanding any other term of this
-------------------
Agreement, the applicable Term shall terminate upon the death or Disability of
the Executive, subject to compliance with Applicable Laws.
(b) Change In Control. Notwithstanding any other term of this
-----------------
Agreement, the applicable Term shall, at the election of the Executive,
delivered by written notice to the Company, terminate effective upon the Change
In Control.
(c) Termination of Agreement by Company for Cause. Subject to
---------------------------------------------
compliance with Applicable Laws, the Company may terminate this Agreement and
the Executive's employment
-11-
<PAGE>
hereunder at any time in the event such termination Termination By Company For
Cause, upon giving written notice to the Executive specifying in reasonable
detail: (i) the event which constitutes the cause; (ii) the pertinent facts and
circumstances underlying the cause; and (iii) the effective date of the
termination(which date may, at the Company's election, be effective upon receipt
of said written notice by the Executive). Such notice shall also afford the
Executive an opportunity to be heard in person by the Board (with the assistance
of the Executive's legal counsel, if the Executive so desires). Such hearing
shall be held reasonably promptly after such notice but, in any event, before
the effective date of the prospective termination.
(d) Termination of Agreement by Executive for Good Reason. The
-----------------------------------------------------
Executive may terminate this Agreement and the Executive's employment hereunder
at any time in the event such termination constitutes Termination By Executive
For Good Reason, upon giving written notice to the Company specifying in
reasonable detail: (i) the event which constitutes the good reason; (ii) the
pertinent facts and circumstances underling the good reason; and (iii) the
effective date of termination (not to exceed ninety {90} days from the date of
such notice, but which date may, at the Executive's election, be effective upon
receipt of said written notice by the Company).
12. EFFECT OF TERMINATION ATTRIBUTABLE TO DEATH OR DISABILITY;
TERMINATION BY COMPANY FOR CAUSE; TERMINATION BY EXECUTIVE WITHOUT
GOOD REASON
In the event the Executive's employment hereunder is terminated before
the expiration of a Term, and such termination is attributable to (i) an event
defined as Death or Disability; (ii) an event defined as Termination By Company
For Cause; and/or (iii) termination by the Executive which does not constitute
---
Termination By Executive For Good Reason, then all rights and obligations of the
Company and the Executive under section 2 [Employment Obligations], section 4
--------- ---------
[Compensation], section 6 [Business Expenses] and section 8 [ Personal Time-Off]
--------- ---------
shall terminate as of the effective date of the termination; provided, however:
(a) The Company (and/or its Subsidiaries) shall pay the Executive's
accrued but unpaid Monthly Salary and Personal Time-Off days through the
effective date of the termination on or before the close of business on such
effective date; and the Executive shall not be entitled to Monthly Salary and/or
Personal Time-Off days after the effective date of the termination;
(b) The Company (and/or its Subsidiaries) shall pay any declared
but unpaid Performance Bonus ;
(c) The Company (and/or its Subsidiaries) shall reimburse the
Executive for an business expenses incurred prior to the effective date of the
termination, within three (3) business days after the Executive's submission of
the Executive's expense report to the Company; and
(d) The Executive shall not be entitled to continue to participate
in any Employee Benefit Plans except to the extent provided in such plans for
terminated participants, or as may be required by Applicable Law.
Notwithstanding the foregoing, amounts which are vested in any Employee Benefit
Plans shall be payable in accordance with such plan.
-12-
<PAGE>
13. EFFECT OF TERMINATION WHERE TERMINATION ATTRIBUTABLE TO CHANGE IN
CONTROL; TERMINATION BY EXECUTIVE FOR GOOD REASON; TERMINATION BY
COMPANY WITHOUT CAUSE
In the event the Executive's employment hereunder is terminated before
the expiration of a Term, and such termination is attributable to (i) an event
defined as a Change in Control; (ii) an event defined as a Termination by
Executive for Good Reason; and/or (iii) termination by the Company which does
not constitute a Termination By Company for Cause; then all rights and
obligations of the Company and the Executive under section 2 [Employment
---------
Obligations], section 4 [Compensation], section 6 [Business Expenses], and
--------- ---------
section 8 [Personal Time-Off] shall terminate as of the effective date of the
- ---------
termination date; provided, however:
(a) The Company (and/or its Subsidiaries) shall continue to pay the
Executive's then effective Monthly Salary through the earlier of (i) the pending
-------
Term of this Agreement or (ii) the period which expires eighteen (18) months
after the effective date of termination, on the same basis as previously
paid to the Executive, but subject to such minimum increases as are
described in section 4;
---------
(b) The Company (and/or its Subsidiaries) shall pay the Executive's
declared but unpaid Performance Bonus;
(c) At the election of the Executive, the Company (and/or its
Subsidiaries) shall (i) permit the Executive to continue to participate in any
Employee Benefit Plans, except to the extent prohibited in such plans for
terminated employees, or as may be required by Applicable Law; or (ii) provide
the Executive with additional compensation, payable on a monthly basis, which
would approximate the cost to the Executive to obtain comparable benefits;
(d) The Company (and/or its Subsidiaries) shall reimburse the
Executive for the Executive's business expenses incurred through the effective
date of the termination, within three (3) business days of the Executive's
submission of the Executive's expense report to the Company; and
The Executive shall not be required to mitigate the amount of any
payment pursuant to this section 13 by seeking other employment or otherwise,
----------
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment. The
Executive, in turn, agrees that the provisions of this section 13 shall act as a
----------
severance payment to the Executive, and as such shall satisfy all claims the
Executive may have, whether at law or equity; in connection with the early
termination of this Agreement.
14. REPRESENTATIONS AND WARRANTIES OF PARTIES
(a) By All Parties. Each of the parties to this Agreement hereby
--------------
represents and warrants to each of the other parties to this Agreement, each of
which is deemed to be a separate representation and warranty, as follows:
(i) Organization, Power and Authority. Such party, if an
---------------------------------
entity is duly organized, validly existing and in good standing under the
laws of its state, territory or province of incorporation or organization,
and has all requisite corporate or other power and authority to enter into
this Agreement.
-13-
<PAGE>
(ii) Authorization. The execution and delivery of this Agreement
-------------
by such party, and the performance by such party of the transactions herein
contemplated, have, if such party is an entity, been duly authorized by its
governing organizational documents, and are not prohibited by its governing
organization documents, and no further corporate or other action on the
part of such party is necessary to authorize this Agreement, or the
performance of such transactions.
(iii) Validity. This Agreement has been duly executed and
--------
delivered by such party and, assuming due authorization, execution and
delivery by all of the other parties hereto, is valid and binding upon such
party in accordance with its terms, except as limited by: (1) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditor rights generally; and (2) general
principles of equity (regardless of whether such enforcement is considered
in a proceeding in equity or at law).
(iv) Non-Contravention. Neither the execution or delivery of
-----------------
this Agreement, nor the performance by such party of the transactions
contemplated herein: (1) if such party is an entity, will breach or
conflict with any of the provisions of such party's governing
organizational documents; or (2) to the best of such party's knowledge and
belief, will such actions violate or constitute an event of default under
any agreement or other instrument to which such party is a party.
(v) Legal Representation. Such party: (1) had the advice, or
--------------------
sufficient opportunity to obtain the advice, of legal counsel separate and
independent from legal counsel for any other party hereto; and (2) such
party was not represented by the legal counsel of any other party hereto in
connection with the transactions contemplated by this Agreement, nor was
such party under any belief or understanding that such legal counsel was
representing such party's interests.
(vi) Fairness. The terms and conditions of the transactions
--------
contemplated by this Agreement are fair and reasonable to such party based
upon all of the facts and circumstances at the time this Agreement is
entered into; and such party has voluntarily entered into the transactions
contemplated by this Agreement, without duress or coercion.
(b) By Executive. The Executive hereby represents and warrants to the
------------
Company that the Executive is not Disabled at the time of the execution and
delivery of this Agreement by the Executive.
15. NON-LIABILITY FOR EXECUTIVE'S DEBTS
Except as provided under Applicable Laws, the Executive's rights and
obligations under this Agreement shall not be subject to encumbrance or to the
claims of the Executive's creditors (other than the Company), or subject to the
debts, contracts or engagements of the Executive or the Executive's heirs,
successors and assigns, and any attempt to do any of the foregoing shall be null
and void ab initio and without force and effect.
-14-
<PAGE>
16. INTERPRETATION AND CONSTRUCTION
(a) Preparation of Agreement. The parties have participated jointly
------------------------
in the negotiation and drafting of this Agreement and each provision hereof. In
the event any ambiguity, conflict, omission or other question of intent or
interpretation arises, this Agreement shall be construed as if jointly drafted
by the parties, and no presumption or burden of proof shall be presumed, implied
or otherwise construed favoring or disfavoring any party by virtue of the
authorship of this Agreement or of any provision hereof.
(b) Performance on Business Day. In the event the date on which a
---------------------------
party is required to take any action under the terms of this Agreement is not a
business day, the action shall, unless otherwise provided herein, be deemed to
be required to be taken on the next succeeding business day. For purposes of
this section, the term "business day" shall mean Monday through Friday
(excluding any legal holidays).
(c) Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made by any party in connection with any transaction contemplated
by this Agreement shall, irrespective of any investigation made by or on behalf
of any other party hereto, survive the execution and delivery of this Agreement
and the performance or consummation of any transaction described in this
Agreement, and shall continue in full force and effect forever thereafter
(subject to any applicable statutes of limitation) .
(d) Independent Significance. The parties intend that each
------------------------
representation, warranty and covenant shall have independent significance. If
any party has falsely made or breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
falsely made or breached shall not detract from or mitigate the fact that the
party has falsely made or breached the first representation, warranty or
covenant.
(e) Entire Agreement; No Collateral Representations. Each party
-----------------------------------------------
expressly acknowledges and agrees that this Agreement: (i) is the final,
complete and exclusive statement of the agreement of the parties with respect to
the subject matter hereof; (ii) supersede any prior or contemporaneous
agreements, memorandums, proposals, commitments, guaranties, assurances,
communications, discussions, promises, representations, understandings, conduct,
acts, courses of dealing, warranties, interpretations or terms of any kind,
whether oral or written (collectively and severally, the "prior agreements"),
and that any such prior agreements are of no force or effect except as expressly
set forth herein; and (iii) may not be varied, supplemented or contradicted by
evidence of prior agreements, or by evidence of subsequent oral agreements. No
prior drafts of this Agreement, and no words or phrases from any prior drafts,
shall be admissible into evidence in any action or suit involving this
Agreement.
(f) Amendment; Waiver; Forbearance. Except as expressly provided
------------------------------
herein, neither this Agreement nor any of the terms, provisions, obligations or
rights contained herein, may be amended, modified, supplemented, augmented,
rescinded, discharged or terminated (other than by performance), except by a
written instrument or instruments signed by all of the parties to this
Agreement. No waiver of: (i) any breach of any term, provision or agreement;
(ii) the performance of any act or obligation under this Agreement; and/or (iii)
any right granted under this Agreement, shall be
-15-
<PAGE>
effective and binding unless such waiver shall be in a written instrument or
instruments signed by each party claimed to have given or consented to such
waiver. Except to the extent that the party or parties claimed to have given or
consented to a waiver may have otherwise agreed in writing, no such waiver shall
be deemed a waiver or relinquishment of any other term, provision, agreement,
act, obligation or right under this Agreement, or of any preceding or subsequent
breach thereof. No forbearance by a party in seeking a remedy for any
noncompliance or breach by another party hereto shall be deemed to be a waiver
by such forbearing party of its rights and remedies with respect to such
noncompliance or breach, unless such waiver shall be in a written instrument or
instruments signed by the forbearing party.
(g) Remedies Cumulative. The remedies of each party under this
-------------------
Agreement cumulative and shall not exclude any other remedies to which such
party may be lawfully entitled.
(h) Severability. If any term or provision of this Agreement, or
------------
the application thereof to any person or circumstance, shall to any extent be
determined to be invalid, illegal or unenforceable under present or future laws,
then, and in such event: (i) the performance of the offending term or provision
(but only to the extent its application is invalid, illegal or unenforceable)
shall be excused as if it had never been incorporated into this Agreement, and,
in lieu of such excused provision, there shall be added a provision as similar
in terms and amount to such excused provision as may be possible and still be
legal, valid and enforceable; and (ii) the remaining part of this Agreement
(including the application of the offending term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable) shall not be affected thereby, and shall continue in full force
and effect to the fullest legal extent .
(i) Time is of the Essence. Except and to the extent there is a
----------------------
specific cure provision in this Agreement, each party understands and agrees
that: (i) time of performance is strictly of the essence with respect to each
and every date, term, condition, obligation and provision hereof imposed upon
such party; and (ii) the failure to timely perform any of the terms, conditions,
obligations or provisions hereof by such party shall constitute a material
breach and a noncurable (but waivable) default under this Agreement by such
party.
(j) Parties in Interest. Nothing in this Agreement shall confer any
-------------------
rights or remedies under or by reason of this Agreement on any persons other
than the parties hereto and their respective successors and assigns, if any, or
as may be permitted hereunder; nor shall anything in this Agreement relieve or
discharge the obligation or liability of any third person to any party to this
Agreement; nor shall any provision give any third person any right of
subrogation or action against any party to this Agreement.
(k) No Reliance Upon Prior Representations. Each party acknowledges
--------------------------------------
that: (1) no other party has made any oral representation or promise which would
induce such party, prior to executing this Agreement, to change such party's
position to his, her or its detriment, to partially perform, or to part with
value in reliance upon such representation or promise; and (2) such party has
not so changed its position, performed or parted with value prior to the time of
the execution of this Agreement, or such party has taken such action at its own
risk.
(l) Rules of Construction. In interpreting the meaning of this
---------------------
Agreement: (i) the term "person" is defined in its broadest sense to include any
individual or natural person, entity (as such term is defined in this subsection
----------
(l)) and/or fiduciary (as such term is defined in this subsection (l)), and
- --- --------------
their respective successors and assigns; (ii) the term "entity" means any legal
entity, including any
-16-
<PAGE>
corporation, association, joint stock company, partnership (limited, general or
limited liability), joint-venture, and limited liability company, business
trust, trust (whether revocable or irrevocable), pension or profit sharing plan,
individual retirement account, or fiduciary or custodial arrangement; (iii) the
term "fiduciary" means any person acting in a fiduciary capacity, including in
their capacity as a trustee or a custodian; (iv) the term "affiliate" means any
person controlling, controlled by, or under common control with a party (for
purposes of the foregoing, the term "control" (including with the correlative
meanings, the terms "controlled by" and "under common control with") means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a person, whether through the ownership of
voting securities or by contract or otherwise); (v) the term "subsidiary" means
any entity in which a party holds a controlling interest; (vi) the words
"herein" and "hereunder" and other words of similar report refer to this
Agreement as a whole, and not to any particular sections, subsections,
paragraph, subparagraph or other subdivision of this Agreement; (vii) the words
"including," "includes," and "include" shall be deemed to be followed by the
words "including without limitation;" (viii) the word "or" shall not be deemed
to be exclusive unless the context indicates otherwise; and (ix) the word "all"
shall be deemed to include the word "any," and vice versa. All pronouns and any
variation thereof used in this Agreement shall be deemed to refer to the
masculine, feminine, or neuter (as the case may be), and to the singular or
plural (as the case may be), as the identity of the person or persons or the
context may require for proper interpretation of this Agreement. Any references
in this Agreement to "dollars" shall be deemed to refer to the currency of the
United States of America, unless such reference specifically references a
dollar-denominated currency of a country other than the United States of
America. The headings used in this Agreement are for convenience and reference
purposes only, and shall not be used in construing or interpreting the scope or
intent of this Agreement or any provision hereof. Each cross-references in this
Agreement shall, unless specifically directed to another agreement or document,
be construed only to refer to provisions within this Agreement, and shall not be
construed to refer to the overall transaction or to any other agreement or
document. Each exhibit, addendum, schedule and/or attachment referenced in this
Agreement shall be construed to be incorporated into this Agreement by such
reference and made a part hereof. References to any agreements (other than this
Agreement) shall include all amendments, modifications, supplements and/or
renewals thereof. Unless the context requires otherwise: (1) any reference
herein to any federal, state, local or foreign statutes or laws (collectively,
the "Statutes") will be deemed to include all rules and regulations promulgated
thereunder: and (2) any references herein to any Statute and/or any specific
section or provision of any such Statute are intended to refer to such section
or provision thereof as presently enacted and as subsequently amended,
succeeded, recodified or renumbered.
17. ENFORCEMENT
(a) Governing Law. This Agreement and the rights and remedies of each
-------------
party arising out of or relating to this Agreement (including equitable
remedies) shall be solely governed by, interpreted under, and construed and
enforced in accordance with the laws (without regard to the conflicts of law
principles) of the Province of Alberta, as if this Agreement were made, and as
if its obligations were to be performed in their entirety, within the Province
of Alberta.
(b) Recovery of Fees and Costs. If any party institutes, or should
--------------------------
any party otherwise become a party to, any action or proceeding based upon or
arising out of this Agreement, including the enforcement or interpretation of
this Agreement or any provision hereof, or for damages by reason of any alleged
breach of this Agreement or any provision hereof, or for a declaration of rights
in connection herewith, or for any other relief, including equitable relief, in
connection herewith, the "prevailing party" (as such term is defined below) in
any such action or proceeding, whether or not such
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<PAGE>
action or proceeding proceeds to final judgment or determination, shall be
entitled to receive from the non-prevailing party as a cost of suit, and not as
damages, all fees, costs and expenses of enforcing any right of the prevailing
party (collectively, "fees and costs"), including: (i) reasonable attorneys'
fees and costs and expenses; (ii) witness fees (including experts engaged by the
parties, but excluding officers, directors, employees, managers or general
partners of the parties); (iii) accountants' fees; (iv) fees of other
professionals and (v) any and all other similar fees incurred in the prosecution
or defense of the action or proceeding; including the following: (1)
postjudgment motions; (2) contempt proceedings; (3) garnishment, levy, and
debtor and third party examinations; (4) discovery and (5) bankruptcy
litigation. All of the aforesaid fees and costs shall be deemed to have accrued
upon the commencement of such action, and shall be paid whether or not such
action is prosecuted to judgment. Any judgment or order entered in such action
shall contain a specific provision providing for the recovery of the aforesaid
fees, costs and expenses incurred in enforcing such judgment and an award of
prejudgment interest from the date of the breach at the maximum rate of interest
allowed by law. The term "prevailing party" is defined as the party who is
determined to prevail by the court after its consideration of all damages and
equities in the action or proceeding (the court shall retain the discretion to
determine that no party is the prevailing party, in which case no party shall be
entitled to recover its fees and costs under this subsection (b)).
--------------
18. ASSIGNMENT AND DELEGATION; SUCCESSORS AND ASSIGNS.
(a) Assignment or Delegation. Except as specifically provided in this
------------------------
Agreement, neither party (an "assigning party") may directly or indirectly sell,
license, transfer or assign (whether through a merger, consolidation,
conversion, sale of assets, sale or exchange of securities, or by operation of
law, or otherwise) any of such party's rights or interests under this Agreement,
or delegate any of such party's duties or obligations under this Agreement, in
whole or in part, including to any subsidiary or to any affiliate, without the
prior written consent of the other party (a "consenting party"), which consent
may be withheld in the consenting party's sole and absolute discretion;
provided, however:
(i) Subject to prior compliance with subsection (iii) and
----------------
subsection (iv) below, an assigning party may assign all of the rights and
---------------
interests and delegate all of the duties and obligations of the assigning
party under this Agreement in connection with a transaction whose principal
purpose is to change the State in which the assigning party is
incorporated, or to form a holding company, or to effect a similar
reorganization as to form of entity without change of beneficial ownership,
including through: (1) a merger or consolidation or stock exchange or
divisive reorganization (i.e., spin-off, split-off or split-up) or other
reorganization with respect to the assigning party and/or its stockholders;
or (2) the sale, transfer, exchange or other disposition by the assigning
party of its assets in a single or series of related transactions, so long
as such transferee, purchaser or surviving person shall expressly assume
such obligations of the assigning party;
(ii) Subject to subsection (iii) and subsection (iv) below, an
---------------- ---------------
assigning party may, with the prior written consent of the consenting
party, which consent the consenting party may withhold in its sole and
absolute discretion, assign all of the rights and interests and delegate
all of the duties and obligations of the assigning party under this
Agreement to any other person in connection with the transfer or sale of
the entire business of the assigning party (other than with respect to a
sale described in subsection (i) above), or the merger or consolidation of
--------------
the assigning party with or into any other person (other than with respect
to a
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<PAGE>
merger or consolidation described in subsection (i) above), so long as such
--------------
transferee, purchaser or surviving person shall expressly assume such
obligations of the assigning party;
(iii) Notwithstanding anything in subsection (i) or subsection
--------------
(ii) above to the contrary, no assignment or transfer under subsection (i)
---- --------------
or subsection (ii) may be effectuated unless the proposed transferee or
---------------
assignee first executes such agreements (including a restated employment
agreement) in such form as the consenting party may deem reasonably
satisfactory to: (1) evidence the assumption by the proposed transferee or
assignee of the obligations of the assigning party; and (2) to ensure that
the consenting party continues to receive such rights, benefits and
protections (both legal and economic) as were contemplated by the
consenting party when entering into this Agreement; and
(iv) Notwithstanding anything in subsection (i) or subsection
-------------- ----------
(ii) above to the contrary: (1) any assumption by a successor or assign
----
under subsection (i) or subsection (ii) above shall in no way release the
-------------- ---------------
assigning party from any of its obligations or liabilities under this
Agreement; and (2) and any merger, consolidation, reorganization, sale or
conveyance under subsection (i) or subsection (ii) above shall not be
-------------- ---------------
deemed to abrogate the rights of the consenting party elsewhere contained
in this Agreement, including those resulting from a Change In Control.
Any purported assignment or transfer in violation of the terms of
this subsection (ii) shall be null and void ab initio and of no force and
---------------
effect, and shall vest no rights or interests in the purported assignee or
transferee.
(b) Successors and Assigns. Subject to subsection (b) above, each and
---------------------- --------------
every representation, warranty, covenant, condition and provision of this
Agreement as it relates to each party hereto shall be binding upon and shall
inure to the benefit of such party and his, her or its respective successors and
permitted assigns, spouses, heirs, executors, administrators and personal and
legal representatives, including any successor (whether direct or indirect, or
by merger, consolidation, conversion, purchase of assets, purchase of securities
or otherwise).
19. MISCELLANEOUS
(a) Costs and Expenses. Except as expressly set forth in this
------------------
Agreement, each party shall pay all legal and other fees, costs and expenses
incurred or to be incurred by such party in negotiating and preparing this
Agreement; in performing due diligence or retaining professional advisors; and
in complying with such party's covenants, agreements and conditions contained
herein.
(b) Cooperation. Each party agrees, without further consideration, to
-----------
cooperate and diligently perform any further acts, deeds and things, and to
execute and deliver any documents that may be reasonably necessary or otherwise
reasonably required to consummate, evidence, confirm and/or carry out the intent
and provisions of this Agreement, all without undue delay or expense.
(c) Notices. Unless otherwise specifically provided in this
-------
Agreement, all notices, demands, requests, consents, approvals or other
communications (collectively and severally called "notices") required or
permitted to be given hereunder, or which are given with respect to this
Agreement, shall be in writing, and shall be given by: (i) personal delivery
(which form of notice shall be deemed to have been given upon delivery), (ii) by
telegraph or by private airborne/overnight delivery
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<PAGE>
service (which forms of notice shall be deemed to have been given upon confirmed
delivery by the delivery agency), (iii) by electronic or facsimile or telephonic
transmission, provided the receiving party has a compatible device or confirms
receipt thereof (which forms of notice shall be deemed delivered upon confirmed
transmission or confirmation of receipt), or (iv) by mailing in the United
States mail by registered or certified mail, return receipt requested, postage
prepaid (which forms of notice shall be deemed to have been given upon the fifth
{5th} business day following the date mailed. Notices shall be addressed at the
addresses first set forth below, or to such other address as the party shall
have specified in a writing delivered to the other parties in accordance with
this paragraph. Any notice given to the estate of a party shall be sufficient if
addressed to the party as provided in this subsection (c).
--------------
If to the Company: Pinnacle Oil International, Inc.
840 - 7/th/ Avenue, SW, Suite 750
Calgary, Alberta, Canada T2P 3G2
If to Executive: James R. Ehrets
55 Blueridge Estates
Site 19, Box 144 SS1
Calgary, Alberta, Canada T2M 4N3
(d) Counterparts; Electronically Transmitted Documents. This
--------------------------------------------------
Agreement may be executed in counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument, binding on all parties hereto. Any signature page of this Agreement
may be detached from any counterpart of this Agreement and reattached to any
other counterpart of this Agreement identical in form hereto by having attached
to it one or more additional signature pages. If a copy or counterpart of this
Agreement is originally executed and such copy or counterpart is thereafter
transmitted electronically by facsimile or similar device, such facsimile
document shall for all purposes be treated as if manually signed by the party
whose facsimile signature appears.
(e) Execution by All Parties Required to be Binding. This Agreement
-----------------------------------------------
shall not be construed to be an offer and shall have no force and effect until
this Agreement is fully executed and delivered by all parties hereto pursuant to
the terms of section19(d). Until such time as all parties fully execute this
Agreement, any party who has previously executed and delivered this Agreement
may revoke such execution and delivery.
WHEREFORE, the parties hereto have executed this Agreement in the City
of Calgary, Province of Alberta, Canada, as of the date first set forth above.
COMPANY: Pinnacle Oil International, Inc.
a Nevada Corporation
By: /s/ George Liszicasz
-----------------------------------------
George Liszicasz, Chief Executive Officer
EXECUTIVE: /s/ James R. Ehrets
---------------------------------------------
James R. Ehrets
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<PAGE>
EXHIBIT 5
PINNACLE OIL INTERNATIONAL, INC.
Suite 750, Phoenix Place
840 7th Avenue S.W.
Calgary, Alberta, Canada T2P 3G2
(403) 264-7020
October ___, 1999
Board of Directors
Pinnacle Oil International, Inc.
Suite 750, Phoenix Place
840 7th Avenue S.W.
Calgary, Alberta, Canada T2P 3G2
Re: Registration Statement On Form S-8 For Shares issuable under (1) Directors'
Options, (2) 1997 Pinnacle Oil International, Inc. Stock Plan And Grants To
Date Thereunder, And (3) 1999 Pinnacle Oil International, Inc. Executive
Stock Option Plan And Grants To Date Thereunder
Ladies and Gentlemen:
As general counsel for Pinnacle Oil International, Inc. ("Pinnacle"), I have
acted as securities counsel for Pinnacle in connection with the preparation of a
registration statement on Form S-8 (the "Registration Statement") under the
United States Securities Act of 1993, as amended (the "Securities Act"), and the
Rules and Regulations of the United States Securities and Exchange Commission
(the promulgated thereunder, to be filed with the Securities and Exchange
Commission on or about October ___, 1999, in connection with the registration of
an aggregate of 1,940,000 shares of Pinnacle's common stock, par value $0.001
per share (the "Shares") issuable to certain eligible employees, officers and
directors of Pinnacle, and certain consultants and advisors to Pinnacle, under
certain Pinnacle employee benefit plans (collectively, the "Plans"), as follows:
1. 135,000 Shares (including additional shares that may be reissued or offered
as a result of stock splits, stock dividends or similar transactions
relating to these shares) which Pinnacle has reserved for issuance upon
exercise of free-standing written stock options previously granted to
certain of its or its subsidiaries' current or former directors, namely,
Messrs. George Liszicasz, R. Dirk Stinson, Lorne W. Carson, Clive Boulton
and Andrew F. Pollet (the "Directors' Options");
2. 285,000 Shares (including additional shares that may be reissued or offered
as a result of stock splits, stock dividends or similar transactions
relating to these shares) which Pinnacle has reserved for issuance upon
exercise of written stock options previously granted to certain of its
employees (including the undersigned) under the 1997 Pinnacle Oil
International, Inc. Stock Plan (the "1997 Stock Plan");
3. 520,000 Shares (including additional shares that may be reissued or offered
as a result of cancellations of grants, stock splits, stock dividends or
similar transactions relating to these shares) which Pinnacle has reserved
for issuance with respect to written stock options or stock awards that
Pinnacle may prospectively grant to certain of its employees, directors,
consultants and advisors
<PAGE>
under the 1997 Stock Plan; and
4. 1,000,000 Shares (including additional shares that may be reissued or
offered as a result of stock splits, stock dividends or similar transactions
relating to these shares) which Pinnacle has reserved for issuance upon
exercise of written options previously granted to certain of its executive
officers (Daniel C. Topolinsky and James R. Ehrets) under the 1997 Pinnacle
Oil International, Inc. Executive Stock Option Plan (the "1999 Executive
Option Plan").
As counsel to Pinnacle in connection with these transactions, I have examined
the actions taken, and am familiar with the actions proposed to be taken, in
connection with the issuance and sale of the Shares as described above.
Based upon the foregoing, I am of the opinion that, after the Registration
Statement becomes effective and after any post-effective amendment required by
law as may become applicable is duly completed, filed and becomes effective
(such Registration Statement as it finally becomes effective, or, if required to
be post-effectively amended, then as it is so amended, is referred to
hereinafter as the "Final Registration Statement"), and when the applicable
provisions of "blue sky" and other state or provincial securities laws shall
have been complied with, and when the Shares are issued and sold in accordance
with the Final Registration Statement and pursuant to the terms of the governing
Plan and underlying agreement evidencing the grant, the Shares will be legally
authorized, fully paid and nonassessable.
I express no opinion as to compliance with "blue sky" or state or provincial
securities laws of any state or province in which the Shares are proposed to be
offered and sold or as to the effect, if any, which non-compliance with such
laws might have on the validity of issuance of the Shares.
Very truly yours,
/s/ John M. Woodbury, Jr.
- --------------------------
John M. Woodbury, Jr.
General Counsel
<PAGE>
EXHIBIT 23.1
Board of Directors
Pinnacle Oil International, Inc.
We consent to the incorporation by reference in the Registration Statement on
Form S-8 of Pinnacle Oil International, Inc. to be filed on October 18, 1999 of
our report dated March 13, 1999, relating to Pinnacle Oil International, Inc.'s
Consolidated Balance Sheets at December 31, 1998 and 1997, and its related
Consolidated Statements Of Loss, Shareholders' Equity (Deficit) and Cash Flow
for the years then ended. We have also audited Pinnacle Oil International,
Inc.'s Consolidated Statements of Loss, Shareholders' Equity (Deficit) and Cash
Flow for the period January 1, 1997 to December 31, 1998 included in the
Consolidated Statements of Loss, Shareholders' Equity (Deficit) and Cash Flow
for the period October 20, 1995 (inception) to 31 December 1998 (cumulative).
/s/ Deloitte & Touche LLP
Calgary, Alberta
October 15, 1999
<PAGE>
EXHIBIT 23.2
Board of Directors
Pinnacle Oil International, Inc.
We consent to the incorporation by reference in the Registration Statement on
Form S-8 of Pinnacle Oil International, Inc. to be filed on October 18, 1999 of
our report dated March 15, 1997, relating to the Consolidated Statements of
Loss, Shareholders' Equity (Deficit) and Cash Flow for the year ended 31
December 1996 of Pinnacle Oil International, Inc. (formerly Auric Mining
Corporation), as well as its Consolidated Statements of Loss, Shareholders'
Equity (Deficit) and Cash Flow for the period from 20 October 1995 (inception)
to 31 December 1996 (cumulative).
/s/ BDO Dunwoody LLP
Chartered Accountants
Vancouver, British Columbia
October 15, 1999
