<PAGE> 1
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB/A-1
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SE CURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission file number 0-11378
TRANSGLOBE ENERGY CORPORATION
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C>
BRITISH COLUMBIA N/A
(State or other Jurisdiction of Incorporation
or Organization) (I.R.S. Employer Identification No.)
</TABLE>
1450, 505 - 3 STREET S.W., CALGARY, AB T2P 3E6
(Address of Principal Executive Office) (Postal Code)
403-264-9888
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act
<TABLE>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
N/A ON WHICH REGISTERED
</TABLE>
Securities registered under Section 12(g) of the Exchange Act:
------------------------------------
COMMON SHARES -- NO PAR VALUE
(Title of Class)
Check whether the issue: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [
] No [X].
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10 KSB [ ].
Issuer's revenues for its most recent fiscal year were $1,502,395.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the average bid and asked prices of the stock, as of
December 9, 1997 was 17,622,902 Shares X 1 1/32 = $18,173,618.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required to be
filed by section 1, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
As of December 9 1997 18,181,377 common shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
the part of the Form 10-KSB (e.g., part I, Part II, etc.) into which the
document is incorporated: (1) any annual report to security holders; (2) any
proxy or information statement; and (3) any prospectus filed pursuant to Rule
424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990). NONE
Transitional Small Business Disclosure Format (check one): Yes [ ]
No [X]
================================================================================
<PAGE> 2
AUDITORS' REPORT
TO THE SHAREHOLDERS OF
TRANSGLOBE ENERGY CORPORATION
We have audited the consolidated balance sheets of TransGlobe Energy
Corporation as at September 30, 1997 and 1996 and the consolidated statements of
operations and cash flows for each of the years in the two year period then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at September 30, 1997 and
1996 and the results of its operations and the changes in its financial position
for each of the years in the two year period then ended in accordance with
generally accepted accounting principles in Canada. As required by the Company
Act (British Columbia), we report that, in our opinion, these principles have
been applied on a consistent basis.
/s/ KPMG
Chartered Accountants
Calgary, Canada
November 21, 1997
<PAGE> 3
PART III
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibits marked with an asterisk have been previously filed with the
Securities and Exchange Commission by the Company, and are incorporated by
reference, as indicated. Other exhibits, if not so designated, are filed with
this Form 10-KSB/A-1.
Exhibit 3* -- Certificate of Incorporation as amended and by-laws.
Exhibit 10.1 -- Employment agreement of Ross G. Clarkson dated December 4,
1996.
Exhibit 10.2 -- Employment agreement of Erwin L. Noyes dated November 8,
1996.
Exhibit 10.3 -- Stock Option Plan dated April 16, 1997, as amended October
17, 1997.
Exhibit 21* -- List of subsidiaries of the Registrant.
III-1
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made December 4, 1996
BETWEEN:
TRANSGLOBE ENERGY CORPORATION
a corporation established under the laws of British Columbia
("Company")
AND:
ROSS CLARKSON of Suite 2226 -- 246 Stewart Green S.W.,
Calgary, Alberta
(the "President")
RECITALS:
A. Ross Clarkson is currently a director of the Company and has agreed to
become the President and Chief Executive Officer of the Company; and
B. The Board of Directors of the Company ("Board") has approved that
appointment on the terms set out below:
AGREEMENTS:
For good and valuable consideration, the receipt and sufficiency of which each
party acknowledges, the parties agree as follows:
1. APPOINTMENT
1.1 Beginning December 4, 1996 the Company will employ Ross Clarkson as its
President and Chief Executive Officer.
1.2 The appointment will continue until November 30, 1998 unless sooner
terminated as provided in this Agreement.
2. RESPONSIBILITIES
2.1 The President will diligently and faithfully devote all of his working
time and attention exclusively to the business of the Company and to the
performance of his duties and responsibilities to the utmost of his ability, and
will at all times use his best efforts to promote the interests of the Company.
2.2 Without first obtaining written permission from the Company, the
President will not enter into the service of, be employed by, or otherwise
engaged in any capacity by any person, firm or corporation other than the
Company.
2.3 The President will have the authority, subject always to general or
specific instructions and directions of the Board of Directors of the Company,
to manage the business of the Company, except for matters required by law to be
done by the Board of Directors and the shareholders.
2.4 The President will conform to all lawful direction of the Board and
comply with the Articles of the Company.
III-2
<PAGE> 2
3. FIDUCIARY DUTY
3.1 The President acknowledges that he has a fiduciary relationship with the
Company, whereby he has an absolute duty of trust and fidelity to the Company,
to act loyally and with the utmost good faith exclusively in the best interests
of the Company and to avoid any conflict of interest.
3.2 (a) The President acknowledges that as the President and Chief Executive
Officer, and in any other position as the President may hold, the
President will acquire information about certain matters and things
which are confidential to the Company, and which information is the
exclusive property of the Company.
(b) The President acknowledges the information as referred to in (a)
above could be used to the detriment of the Company. Accordingly,
the President undertakes not to disclose any of it to any third
party either during the term of his employment except as may be
necessary in the proper discharge of his employment under this
Agreement, or after the term of his employment, however caused,
except with the written permission of the Company.
(c) The President acknowledges and agrees that without prejudice to any
other rights of the Company, in the event of his violation or
attempted violation of any of the covenants contained in (a) and (b)
above, an injunction or any other like remedy shall be the only
effective remedy to protect the Company's rights and property as set
out in (a) and (b) above, and that an interim injunction may be
granted immediately on the commencement of any suit.
3.3 At the end of the President's employment, he will immediately return to
the Company or any of its subsidiaries all documents, papers, materials and
other property of or relating to the affairs of the Company which may then be in
his possession or under his control.
4. REMUNERATION
4.1 From December 4, 1996 the Company will pay to the President an annual
salary of $120,000 (Cdn.) which will be paid in equal monthly instalments in
arrears of $10,000 each.
5. INSURANCE BENEFITS
5.1 The Company will enrol the President in the medical and dental insurance
programs presently in force for employees of the Company.
5.2 The Company will pay all premium costs for the benefits described in
Section 5.1.
6. VACATION
6.1 In addition to statutory holidays, the Company will provide the President
with an annual paid vacation of 30 working days each year, to be taken when he
deems appropriate in consideration of the Company's operational requirements.
6.2 If the President does not use all of his vacation entitlement in a given
year, he may accumulate it and use it in a subsequent year. If the President has
unused vacation entitlement to his credit when this Agreement is ended, he will
be paid its equivalent cash value.
6.3 The Company may require the President to use up unused vacation
entitlement.
7. EXPENSES AND ALLOWANCES
7.1 The Company will reimburse the President for all reasonable expenses
incurred by him in connection with the Company's business, in accordance with
its applicable policies.
7.2 The Company will pay for the President's reasonable travelling and
accommodation expenses to travel from Calgary to Vancouver and reside in
Vancouver while on the Company's business.
III-3
<PAGE> 3
7.3 The Company will reimburse the President for all reasonable costs
associated with the relocation of the President to Vancouver from Calgary,
Alberta, which may include, without limitation, moving expenses, temporary hotel
expenses, legal fees and realty commissions.
7.4 The Company will pay for the cost of membership dues to a club intended
for business purposes up to a maximum of $1,000 per year.
7.5 The Company will, subject to insurability, secure and pay the premiums
for a life insurance policy on the President's life in an amount of not less
than one year's salary in which the President's estate will be named as the
beneficiary.
8. SHARE OPTIONS
8.1 In addition to the fixed compensation set out in Section 4, the President
will be entitled to an option to purchase up to 200,000 common shares in the
capital of the Company.
8.2 The exercise price of the optioned shares will be market price calculated
in accordance with the policies and rules of the Vancouver Stock Exchange.
9. BONUSES
9.1 The Company will pay to Ross Clarkson in consideration of his agreeing to
become the president of the Company the amount of $15,000 on January 2, 1997.
9.2 (a) The Company will issue to the President as a performance bonus, in
the form of fully-paid common shares of the Company, upon the
Company's Cash Flow reaching specified amounts as follows:
(i) $3,000,000 -- 10,000 common shares;
(ii) $8,000,000 -- a further 20,000 common shares; and
(iii) $12,000,000 -- a further 30,000 common shares;
(b) "Cash Flow" is defined as gross income measured on an annualized
basis for 2 consecutive quarterly financial periods as shown in the
Company's financial statements.
10. ENDING
10.1 The Company may end this Agreement and the President's employment at any
time for just cause, without any notice and without any liability to the
President.
10.2 The Company may end this Agreement and the President's employment at any
time without just cause by giving written notice to the President, and the
Company will pay to the President a retiring allowance in an amount equal to 24
months of his then current monthly salary.
10.3 (a) The President may end this Agreement and his employment, without
further liability to the Company, by giving 30 days written notice
of resignation to the Board of Directors, which the Company may
waive in whole or in part.
(b) If the Board does not have a majority of its members comprised of
Dr. Harold Laycraft, Erwin Noyes, and others whose election was
proposed by them, the President may, within 6 months after that
event, elect to end this Agreement and his employment and the
Company will pay to the President a retiring allowance in an amount
equal to 24 months of his then current salary.
10.4 If the President should die during the term of this Agreement the Company
will pay to his estate an amount equal to 6 months of his then current salary
and the current period or periods for exercising any unexercised options under
Section 8 will be extended for a period ending 6 months after his death and may
be exercised by his executor or administrator.
III-4
<PAGE> 4
10.5 If this Agreement is ended and the President's employment is terminated
(except for cause) any options granted to him under Section 8 but not yet
exercised may be exercised at any time within 2 years after the date of the
termination; if terminated for cause any unexercised option will automatically
terminate.
10.6 The President acknowledges that the arrangements described in this
Section 9 are fair and reasonable and constitute the Company's sole obligation
to provide notice of termination, severance pay or related compensation.
10.7 Regardless of how this Agreement and the President's employment is ended,
Section 3 will remain in effect after it is ended.
11. NON-COMPETITION
11.1 (a) The President agrees with and for the benefit of the Company that
for a period of 6 months from the date of termination of the
President's employment, however caused, he will not for any reason,
be engaged in a business which directly competes with the business
of the Company.
(b) The President further agrees that, during employment pursuant to
this Agreement and for a period of 6 months following termination of
employment, however caused, he will not hire or take away or cause
to be hired or taken away any employee of the Company or, following
termination of the President's employment, any employee who was in
the employ of the Company during the 6 months preceding termination.
12. DIRECTOR'S LIABILITY INSURANCE/INDEMNITY
12.1 The Company will diligently pursue the obtaining of directors and senior
officers insurance and secure such insurance so long as its cost is not, in the
Board's opinion, excessive.
12.2 The Company will indemnify the President in respect of his actions or
omissions as the President and a director of the Company to the extent set out
in Part 22 of the Articles of the Company to the extent permitted by law.
13. COMPANY'S PROPERTY
13.1 The President acknowledges that all items of any and every nature or kind
created or used by the President under this Agreement, or furnished by the
Company to the President, and all equipment, credit cards, books, records,
reports, files, manuals, literature, confidential information or other materials
shall remain and be considered the exclusive property of the Company at all
times and shall be surrendered to the Company, in good condition, promptly on
the termination of the President's employment irrespective of the time, manner
or cause of the termination.
14. ASSIGNMENT OF RIGHTS
14.1 The rights which accrue to the Company under this Agreement shall pass to
its successors or assigns. The rights of the President under this Agreement are
not assignable or transferable in any manner.
15. NOTICES
15.1 (a) Any notice required or permitted to be given to the President shall
be sufficiently given if delivered to the President personally or if
mailed by registered mail to the President's address last known to
the Company.
(b) Any notice required or permitted to be given to the Company shall be
sufficiently given if mailed by registered mail to the Company's
Head Office at its address last known to the President.
16. GOVERNING LAW
16.1 This Agreement shall be construed in accordance with the laws of the
Province of British Columbia.
III-5
<PAGE> 5
17. INDEPENDENT LEGAL ADVICE
17.1 Each of the Company and the President hereby confirm and acknowledge that
they have sought independent legal advice with respect to their respective
rights and obligations arising from this Agreement and each such party does
further confirm and acknowledge with the understanding that each such party is
relying upon such representations in entering into this Agreement, that this
Agreement constitutes a legal, binding agreement, enforceable as against each
such party in accordance with its terms.
18. DISPUTE RESOLUTION
18.1 Before initiating any legal proceedings, the parties will attempt to
resolve all disputes concerning the interpretation, application or enforcement
of any term of this Agreement by mediated negotiation, and will use their best
efforts to resolve any dispute through mediation.
18.2 If a dispute between the parties concerning the interpretation,
application or enforcement of any term of this Agreement is not resolved by
mediation within 90 days after one party notifies the other in writing of an
intention to mediate the dispute, the parties will submit the matter to binding
arbitration, pursuant to the provisions of the Commercial Arbitration Act of
British Columbia, and the parties hereby irrevocably authorize any arbitrator
who may be appointed to endeavour to mediate the resolution of the dispute
before rendering a binding award.
19. ENTIRE AGREEMENT
19.1 This Agreement contains the entire agreement between the parties with
respect to the President's employment, and cancels and supersedes all prior
agreements between them, and no amendment or variation of the terms of this
Agreement will be effective or binding unless made in writing and signed by both
of them.
20. REGULATORY APPROVAL
20.1 The option to purchase shares in Section 8 and the issue of shares under
Section 9.2 are subject to acceptance by the Vancouver Stock Exchange and any
other applicable regulatory authority and are subject to compliance by the
Company with all applicable securities legislation.
III-6
<PAGE> 6
TO EVIDENCE THEIR AGREEMENT the parties have executed this document on the
dates appearing below.
TRANSGLOBE ENERGY CORPORATION
Per:
- ------------------------------------
Authorized Signatory
- ------------------------------------
Authorized Signatory
Date:
- ------------------------------------
<TABLE>
<S> <C>
ROSS CLARKSON WITNESS:
Signature:
------------------------------------------
Date: Print Name:
- -------------------------------------------- ----------------------------------------
</TABLE>
III-7
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of November 8, 1996
BETWEEN:
TRANSGLOBE ENERGY CORPORATION
a corporation established under the laws of British Columbia
("Company")
AND:
ERWIN NOYES of 1911 Meadowbank Road, Saanichton, British
Columbia. V8M 1X9
(the "Vice-President")
RECITALS:
A. The Vice-President is currently a director of the Company and has agreed to
become the Vice-President of Operations of the Company; and
B. The Board of Directors of the Company ("Board") has approved that
appointment on the terms set out below:
AGREEMENTS:
For good and valuable consideration, the receipt and sufficiency of which each
party acknowledges, the parties agree as follows:
1. APPOINTMENT
1.1 Beginning November 8, 1996 the Company will employ Erwin Noyes as its
Vice-President of Operations.
1.2 The appointment will continue until November 30, 1997 unless sooner
terminated as provided in this Agreement.
2. RESPONSIBILITIES
2.1 The Vice-President will diligently and faithfully devote 1/2 of his
working time and attention exclusively to the business of the Company and to the
performance of his duties and responsibilities to the utmost of his ability, and
will at all times use his best efforts to promote the interests of the Company.
2.2 Without first obtaining written permission from the Company, the
Vice-President will not enter into the service of, be employed by, or otherwise
engaged in any capacity by any person, firm or corporation other than the
Company.
2.3 The Vice-President will have the authority, subject always to general or
specific instructions and directions of the Board of Directors of the Company,
to manage the business of the Company, except for matters required by law to be
done by the Board of Directors and the shareholders.
2.4 The Vice-President will conform to all lawful direction of the Board and
comply with the Articles of the Company.
III-8
<PAGE> 2
3. FIDUCIARY DUTY
3.1 The Vice-President acknowledges that he has a fiduciary relationship with
the Company, whereby he has an absolute duty of trust and fidelity to the
Company, to act loyally and with the utmost good faith exclusively in the best
interests of the Company and to avoid any conflict of interest.
3.2 (a) The Vice-President acknowledges that as the Vice-President and in
any other position as the Vice-President may hold, the
Vice-President will acquire information about certain matters and
things which are confidential to the Company, and which information
is the exclusive property of the Company.
(b) The Vice-President acknowledges the information as referred to in
(a) above could be used to the detriment of the Company.
Accordingly, the Vice-President undertakes not to disclose any of it
to any third party either during the term of his employment except
as may be necessary in the proper discharge of his employment under
this Agreement, or after the term of his employment, however caused,
except with the written permission of the Company.
(c) The Vice-President acknowledges and agrees that without prejudice to
any other rights of the Company, in the event of his violation or
attempted violation of any of the covenants contained in (a) and (b)
above, an injunction or any other like remedy shall be the only
effective remedy to protect the Company's rights and property as set
out in (a) and (b) above, and that an interim injunction may be
granted immediately on the commencement of any suit.
3.3 At the end of the Vice-President's employment, he will immediately return
to the Company or any of its subsidiaries all documents, papers, materials and
other property of or relating to the affairs of the Company which may then be in
his possession or under his control.
4. REMUNERATION
4.1 From November 8, 1996 the Company will pay to the Vice-President an
annual salary of $60,000 (Cdn.) which will be paid in equal monthly instalments
in arrears of $5,000 each.
5. INSURANCE BENEFITS
5.1 The Company will enrol the Vice-President in the medical and dental
insurance programs presently in force for employees of the Company.
5.2 The Company will pay all premium costs for the benefits described in
Section 5.1.
6. VACATION
6.1 In addition to statutory holidays, the Company will provide the
Vice-President with an annual paid vacation of 30 working days each year, to be
taken when he deems appropriate in consideration of the Company's operational
requirements.
6.2 If the Vice-President does not use all of his vacation entitlement in a
given year, he may accumulate it and use it in a subsequent year. If the
Vice-President has unused vacation entitlement to his credit when this Agreement
is ended, he will be paid its equivalent cash value.
6.3 The Company may require the Vice-President to use up unused vacation
entitlement.
7. EXPENSES AND ALLOWANCES
7.1 The Company will reimburse the Vice-President for all reasonable expenses
incurred by him in connection with the Company's business, in accordance with
its applicable policies.
7.2 The Company will pay for the Vice-President's reasonable travelling and
accommodation expenses to travel from Saanichton to Vancouver.
III-9
<PAGE> 3
7.3 (a) The Company will, subject to insurability, obtain, and, so long as
this Agreement continues, pay the premiums for, a life insurance
policy on the Vice-President's life in an amount of not less than
one years salary in which the Vice-President's estate will be named
as the beneficiary.
(b) If this Agreement and the Vice-President's employment with the
Company terminate, the Company will assign to the Vice-President its
interest in the policy on his life.
8. SHARE OPTIONS
8.1 In addition to the fixed compensation set out in Section 4, the
Vice-President will be entitled to an option to purchase 135,000 common shares
in the capital of the Company.
8.2 The exercise price of the optioned shares will be market price calculated
in accordance with the policies and rules of the Vancouver Stock Exchange.
9. ENDING
9.1 The Company may end this Agreement and the Vice-President's employment at
any time for just cause, without any notice and without any liability to the
Vice-President.
9.2 The Company may end this Agreement and the Vice-President's employment at
any time without just cause by giving written notice to the Vice-President, and
the Company will pay to the Vice-President a retiring allowance in an amount
equal to 12 months of his then current monthly salary.
9.3 (a) The Vice-President may end this Agreement and his employment,
without further liability to the Company, by giving 30 days written
notice of resignation to the Board of Directors, which the Company
may waive in whole or in part.
(b) If the Board does not have a majority of its members comprised of
Dr. Harold Laycraft, Erwin Noyes, and others whose election was
proposed by them, the Vice-President may end this Agreement and his
employment and the Company will pay to the Vice-President a retiring
allowance in an amount equal to 6 months of his then current salary.
9.4 If this Agreement is ended and the Vice-President's employment is
terminated any options granted to him under Section 8 but not yet exercised may
be exercised at any time within 2 years after the date of the termination. If
terminated for cause any unexercised option will automatically terminate.
9.5 If the Vice-President should die during the term of this Agreement the
Company will pay to his estate an amount equal to 6 months of his then current
salary and the current period or periods for exercising any unexercised options
under Section 8 will be extended for a period ending 6 months after his death
and may be exercised by his executor or administrator.
9.6 The Vice-President acknowledges that the arrangements described in this
Section 9 are fair and reasonable and constitute the Company's sole obligation
to provide notice of termination, severance pay or related compensation.
9.7 Regardless of how this Agreement and the Vice-President's employment is
ended, Section 3 will remain in effect after it is ended.
10. NON-COMPETITION
10.1 (a) The Vice-President agrees with and for the benefit of the Company
that for a period of six (6) months from the date of termination of
the Vice-President's employment, however caused, he will not for any
reason, be engaged in a business which directly competes with the
business of the Company.
(b) The Vice-President further agrees that, during employment pursuant
to this Agreement and for a period of six (6) months following
termination of employment, however caused, he will not hire or take
away or cause to be hired or taken away any employee of the Company
or, following
III-10
<PAGE> 4
termination of the Vice-President's employment, any employee who was
in the employ of the Company during the six (6) months preceding
termination.
11. DIRECTOR'S LIABILITY INSURANCE/INDEMNITY
11.1 The Company will diligently pursue the obtaining of directors and senior
officers insurance and secure such insurance so long as its cost is not, in the
Board's opinion, excessive.
11.2 The Company will indemnify the Vice-President in respect of his actions
or omissions as the Vice-President and a director of the Company to the extent
set out in Part 22 of the Articles of the Company to the extent permitted by
law.
12. COMPANY'S PROPERTY
12.1 The Vice-President acknowledges that all items of any and every nature or
kind created or used by the Vice-President under this Agreement, or furnished by
the Company to the Vice-President, and all equipment, credit cards, books,
records, reports, files, manuals, literature, confidential information or other
materials shall remain and be considered the exclusive property of the Company
at all times and shall be surrendered to the Company, in good condition,
promptly on the termination of the Vice-President's employment irrespective of
the time, manner or cause of the termination.
13. ASSIGNMENT OF RIGHTS
13.1 The rights which accrue to the Company under this Agreement shall pass to
its successors or assigns. The rights of the Vice-President under this Agreement
are not assignable or transferable in any manner.
14. NOTICES
14.1 (a) Any notice required or permitted to be given to the Vice-President
shall be sufficiently given if delivered to the Vice-President
personally or if mailed by registered mail to the Vice-President's
address last known to the Company.
(b) Any notice required or permitted to be given to the Company shall be
sufficiently given if mailed by registered mail to the Company's
Head Office at its address last known to the Vice-President.
15. GOVERNING LAW
15.1 This Agreement shall be construed in accordance with the laws of the
Province of British Columbia.
16. INDEPENDENT LEGAL ADVICE
16.1 Each of the Company and the Vice-President hereby confirm and acknowledge
that they have sought independent legal advice with respect to their respective
rights and obligations arising from this Agreement and each such party does
further confirm and acknowledge with the understanding that each such party is
relying upon such representations in entering into this Agreement, that this
Agreement constitutes a legal, binding agreement, enforceable as against each
such party in accordance with its terms.
17. DISPUTE RESOLUTION
17.1 Before initiating any legal proceedings, the parties will attempt to
resolve all disputes concerning the interpretation, application or enforcement
of any term of this Agreement by mediated negotiation, and will use their best
efforts to resolve any dispute through mediation.
17.2 If a dispute between the parties concerning the interpretation,
application or enforcement of any term of this Agreement is not resolved by
mediation within 90 days after one party notifies the other in writing of an
intention to mediate the dispute, the parties will submit the matter to binding
arbitration, pursuant to the provisions of the Commercial Arbitration Act of
British Columbia, and the parties hereby irrevocably
III-11
<PAGE> 5
authorize any arbitrator who may be appointed to endeavour to mediate the
resolution of the dispute before rendering a binding award.
18. ENTIRE AGREEMENT
18.1 This Agreement contains the entire agreement between the parties with
respect to the Vice-President's employment, and cancels and supersedes all prior
agreements between them, and no amendment or variation of the terms of this
Agreement will be effective or binding unless made in writing and signed by both
of them.
19. REGULATORY APPROVAL
19.1 The option to purchase shares in Section 8 are subject to acceptance by
the Vancouver Stock Exchange and any other applicable regulatory authority and
are subject to compliance by the Company with all applicable securities
legislation.
TO EVIDENCE THEIR AGREEMENT the parties have executed this document on the
dates appearing below.
TRANSGLOBE ENERGY CORPORATION
Per:
- ------------------------------------
Authorized Signatory
- ------------------------------------
Authorized Signatory
Date:
- ------------------------------------
<TABLE>
<S> <C>
ERWIN NOYES WITNESS:
Signature:
------------------------------------------
Date: Print Name:
- -------------------------------------------- ----------------------------------------
</TABLE>
III-12
<PAGE> 1
EXHIBIT 10.3
TRANSGLOBE ENERGY CORPORATION
STOCK OPTION PLAN
DATED APRIL 16, 1997
AS AMENDED OCTOBER 17, 1997
1. PURPOSE. The purpose of this Stock Option Plan (the "Plan") is to
advance the interests of TransGlobe Energy Corporation ("TransGlobe") and its
shareholders by enhancing the ability of TransGlobe to attract and retain the
best available talent and to encourage the highest level of performance by
senior officers, key employees, directors and consultants through ownership of
common shares ("Common Shares") in TransGlobe.
2. ADMINISTRATION. The Plan will be administered by the Board of Directors
of TransGlobe (the "Board"). The Board may delegate the administration of the
Plan to a committee, in which case all references to the "Board" hereunder will
refer to the committee, except only the Board of Directors may allot shares and
specify the price at which they are to be issued. The Board will have authority,
consistent with the Plan:
(a) to issue options granted in accordance with the formula set forth in
this Plan;
(b) to prescribe the form of certificate evidencing grants of options to
Canadian optionees and the form of agreement evidencing grants of
options to US optionees and any other instruments required under the
Plan and to change such forms from time to time;
(c) to adopt, amend and rescind rules and regulations for the
administration of the Plan, provided however, that except as
specified in Section 5(d), no amendment which would increase the
maximum number of Common Shares for which options may be granted
will be made by the Board without the approval of shareholders and
regulatory authorities under the Securities Laws, as defined below;
and
(d) to interpret and administer the Plan and to decide all questions and
settle all controversies that may arise in connection with the Plan,
all of which decisions of the Board will be final and conclusive.
3. COMPLIANCE WITH LAWS. Transactions under the Plan are intended to comply
with all relevant provisions of law, including, without limitation, the United
States Securities Act of 1933 and the regulations thereunder, all applicable
conditions of Rule 16b-3 or its successors under Section 16 of the United States
Securities Exchange Act of 1934, the Securities Act and the regulations
thereunder of the province in which TransGlobe is resident and the provinces in
which optionees may reside, and the requirements of The Alberta Stock Exchange
(the "ASE"), The Toronto Stock Exchange (the "TSE"), the Nasdaq Stock Market,
Inc. ("NASDAQ"), and any other stock exchange or market upon which the Common
Shares may then be listed or quoted (together, the "Applicable Laws"). To the
extent any provision of the Plan or action by the Board fails to so comply, it
will be deemed null and void, to the extent permitted by law and deemed
advisable by the Board.
TransGlobe will not be obligated to issue and deliver any Common Shares pursuant
to the exercise of any option until, in the opinion of TransGlobe's counsel, all
Applicable Laws have been complied with. Without limiting the generality of the
foregoing, TransGlobe may require from the person exercising the option such
investment representation, undertaking or agreement, if any, as counsel for
TransGlobe may consider necessary in order to comply with the Applicable Laws.
4. ELIGIBILITY. The Board may from time to time authorize the grant of
options to anyone who is at the time of such authorization:
(a) a senior officer or key employee ("Employee") of TransGlobe or any
subsidiary of TransGlobe ("Subsidiary"), meaning any corporation,
partnership, joint venture or other entity in which
III-13
<PAGE> 2
TransGlobe owns or controls, directly or indirectly, not less than
50% of the total voting power or equity interests, and includes a
subsidiary of a subsidiary;
(b) subject to the Applicable Laws, a person providing ongoing
consulting services (a "Consultant") to TransGlobe or a Subsidiary;
or
(c) a member of the Board of Directors of TransGlobe or of a Subsidiary.
5. SHARES SUBJECT TO THE PLAN
(a) Subject to adjustment as provided in Section 5(d):
(i) the aggregate number of Common Shares to be issued from time
to time upon the exercise of options granted under the Plan
will not exceed 1,117,037 Common Shares;
(ii) no single officer, employee, or director of TransGlobe will
hold options for more than 5% of the issued and outstanding
Common Shares;
(iii) the aggregate number of Common Shares to be issued upon the
exercise of options granted under the Plan to Consultants from
time to time will not exceed 2% of the issued and outstanding
Common Shares; and
(iv) no single Consultant will be granted options for more than 1%
per year of the issued and outstanding Common Shares.
(b) If any option granted under the Plan terminates or is cancelled
without having been exercised in full, the number of Common Shares
unpurchased as to which such option was not exercised will be
available for future grants within the limits set forth in Section
5(a).
(c) No fractional Common Shares will be issued under this Plan.
(d) In the event of a stock split, consolidation or reclassification or
other change in TransGlobe's capital, other than an issue of Common
Shares or by way of stock dividend, the number and exercise price of
options will be adjusted by the Board to preserve the rights of the
participants in this Plan substantially proportionate to those
existing prior to such event.
6. TERMS AND CONDITIONS OF OPTIONS. All options granted under the Plan will
be subject to the following terms and conditions:
(a) The per-share exercise price of each option granted will be not less
than the market value (the "Market Value") of a Common Share on the
date an option is granted, which Market Value will be determined as
follows:
(i) if the Common Shares are listed or quoted on any established
stock exchange or market, including without limitation the TSE
or the ASE, the NASDAQ National Market or The NASDAQ Small Cap
Market, the Market Value will be no less than the higher of
the last sale prices of a Common Shares at the close of
business on the last trading day preceding the date on which
such option is granted; and
(ii) in the absence of an established market for the Common Shares,
the Market Value will be determined in good faith by the
Board.
(b) The latest date on which an option may be exercised will be the
fifth anniversary of the date the option was granted.
(c) 50% of the options granted to each optionee under the Plan will
become vested and exercisable on the six-month anniversary of the
grant date, or at such other time as may be established by the Board
at the time of the grant, and the balance on the first anniversary
of the grant date.
III-14
<PAGE> 3
(d) Any exercise of an option must be in writing, signed by the proper
person and delivered or mailed to TransGlobe, accompanied by any
documents required by the Board and payment in full as provided
below for the number of Common Shares for which the option is
exercised.
(e) The price of Common Shares purchased on the exercise of an option
must be paid in full by cash, bank draft or money order payable to
the order of TransGlobe.
(f) No option or any interest therein will be transferable or assignable
otherwise than by will or pursuant to the laws of succession.
(g) An optionee will have no rights as a shareholder of TransGlobe with
respect to any Common Shares covered by any option until such time
as and to the extent only that such option has been exercised.
(h) If any optionee ceases to be eligible for a grant of options under
this Plan for any reason (a "Termination"), except the death of an
optionee or by reason of retirement pursuant to an established
retirement policy of the Board, all options granted to the optionee
under the Plan and then held by the optionee will, to the extent
such options were exercisable immediately prior to Termination,
continue to be exercisable by the optionee for a period of 30 days
following Termination or until the expiration date of the option if
earlier.
(i) If Termination is by reason of retirement pursuant to an established
retirement policy of the Board, all options held by the retiring
optionee will become vested and exercisable, to the extent not
already vested and exercisable, immediately prior to retirement, and
they continue to be exercisable until their original expiration
date.
(j) In the event of the death of an optionee all options granted to the
optionee under the Plan and held by the optionee immediately before
death will, to the extent such options were exercisable at that
time, continue to be exercisable by the legal representative of the
optionee for a period of 6 months following the death of the
optionee or until the expiration date of the option if earlier.
After such time, the options will terminate.
7. ADDITIONAL PROVISIONS CONCERNING U.S. OPTIONEES.
(a) Options granted to an Employee subject to personal income tax under
the United States Internal Revenue Code (the "Code"), (such Employee
referred to in this Section as a "U.S. Employee") will be Incentive
Stock Options as that term is defined in the Code.
(b) Options granted to an optionee who is subject to personal income tax
under the Code who is not an Employee will not be Incentive Stock
Options, and any written agreement with such an optionee for a grant
of options under the Plan will state that the options granted
thereunder are Non-Qualifying Stock Options for U.S. income tax
purposes.
(c) In addition to the terms and conditions of options granted under the
Plan listed in Section 6 above, options granted to a U.S. Employee
will be subject to the following terms and conditions:
(i) options will be designated in the written option agreement
between the U.S. Employee and TransGlobe as Incentive Stock
Options; and
(ii) if the U.S. Employee is directly or indirectly the beneficial
owner of 10% or more of the combined voting power of all
classes of shares in the capital of TransGlobe or a Subsidiary
at the time an option is granted to the U.S. Employee, the
exercise price of such option will be equal to at least 110%
of the Market Value of TransGlobe's Common Shares.
(d) If a U.S. Employee is granted options under the Plan, the written
option agreement with the U.S. Employee will contain
acknowledgements by the U.S. Employee that:
(i) notwithstanding a designation of options granted to a U.S.
Employee as Incentive Stock Options, to the extent that the
aggregate Market Value of the Common Shares subject to
III-15
<PAGE> 4
options which are exercisable for the first time by any U.S.
Employee during any calendar year exceeds US$100,000, such
excess options will not be treated as Incentive Stock Options;
and
(ii) in order for options granted under the Plan to be treated as
Incentive Stock Options:
A. Common Shares purchased on the exercise of an option must
not be sold or otherwise disposed of within 2 years from
the date the option was granted, or within 1 year from
the date the option was exercised; and
B. the U.S. Employee must maintain his status as a U.S.
Employee at all times during the period beginning on the
date the option is granted and ending on the date 30 days
before the date the option is exercised.
(e) The acknowledgement of the U.S. Employee in (d)(ii)B above does not
confer upon the U.S. Employee any right with respect to continuation
of his employment relationship with TransGlobe, nor will it
interfere in any way with TransGlobe's right to terminate his
employment relationship at any time, with or without cause.
8. TAX CONSEQUENCES OF PLAN. Notwithstanding Section 7, TransGlobe does not
assume responsibility for the income or other tax consequences for optionees or
persons eligible under the Plan and they are advised to consult with their own
tax advisors.
9. EFFECT OF CERTAIN CORPORATE TRANSACTIONS. In the event of a
consolidation or merger in which TransGlobe is not the surviving company, or in
the event its outstanding shares are converted into securities of another entity
or exchanged for other consideration, or in the event of an offer for Common
Shares being made by a third party that constitutes a take-over bid as that term
is defined in the Securities Act (Alberta) or would constitute a take-over bid
as that term is defined in the Securities Act (Alberta) but for the fact that
the offeree is not in Alberta, all outstanding options will immediately vest,
provided, however, that if such transaction does not close, all such options
will be deemed not to have vested.
10. TERM OF PLAN. The Plan will become effective upon the earlier to occur
of its adoption by the Board of Directors [April 16, 1997] or its approval by
the shareholders of TransGlobe at a general meeting and shall terminate ten
years thereafter.
11. AMENDMENTS TO PLAN. Amendments to the Plan, from time to time, will
become effective on the date of the approval of such amendments by the Board
subject to approval of such amendments by securities regulators under the
Applicable Laws, or ratification by the shareholders of TransGlobe at a general
meeting, as may be required.
III-16
