EXHIBIT 10.3
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement"), between Pangea Petroleum Corporation, a
Colorado corporation authorized to do business in the State of Texas (
"Pangea"), Mass Energy, Inc., a Texas corporation and wholly-owned subsidiary of
the Pangea (the "Employer"), and Xxxxxxx X. Xxxxxx (the "Employee").
1. For good consideration, the Employer employs the Employee on the following
terms and conditions.
2. Term of Employment: Subject to the provisions of termination set forth below
this agreement will begin on September 15, 2000 and end on September 14, 2002
unless sooner terminated as provided in this Agreement.
3. Salary/Benefits: The Employer shall pay the Employee compensation as provided
in this Paragraph 3. In addition to salary as provided in Paragraph 3(a), as
additional employment compensation, Pangea will grant the Employee options with
respect to its common capital stock ("Pangea Stock") as provided in this
Agreement. All such options shall be fully vested and fully exercisable upon
issuance, and the Pangea common shares issued pursuant to such options shall be
registered under The Securities Act of 1933 and issued under an employee stock
option plan filed with the United States Securities and Exchange Commission in a
currently effective S-8 Registration Statement.
(a) Subject to any salary increase approved by the Employer's Board of
Directors, the Employer shall pay Employee a salary of $5,000 per month, payable
at regular payroll periods.
(b) Pangea shall grant the Employee options to purchase 50,000 shares
of Pangea Stock on the execution of this Agreement. Thereafter, Pangea shall
grant the Employee options to purchase 25,000 shares of Pangea Stock per month.
The options issued under this Paragraph 3(b) will have an exercise price of
$1.00 per share, may be exercised in whole or in part until expiration, and
unexercised options shall expire on the third anniversary of issuance. If
employment is terminated under this Agreement before the expiration of the two
year term described in Paragraph 2 above, the Employee shall retain all options
theretofore granted and in addition shall be granted, upon termination, options
for a number of shares of Pangea common capital stock, pro rated to the date of
employment termination.
(c) Pangea shall pay the Employee, within 30 business days of receipt
by Pangea, its subsidiary or affiliate, one percent of the net proceeds received
upon the successful completion by Pangea or any of its subsidiaries or
affiliates of the sale (or series of related sales) of any major asset (major
asset is defined as an asset whose aggregate sale price, whether realized from
one sale or a series of related sales, is $500,000 or more). If sale proceeds
for a major asset are received in installments, the Employee will be paid one
percent of each such installment within 30 business days of receipt thereof by
Pangea, its subsidiary or affiliate.
(d) The Employer will convey to the Employee a two percent (of 8/8)
overriding royalty interest in leases owned or acquired by the Employer for
exploration of oil, gas and other minerals in the SouthWest El Toro prospect in
Xxxxxxx County, Texas. Within 30 business days after the leases are acquired by
the Employer, the Employer will deliver to the Employee a duly executed and
notarized recordable assignment sufficient in form and substance to grant the
overriding royalty interest described in this Paragraph 3(d).
(e) In addition to the foregoing, the Pangea shall grant the Employee
options to purchase shares of Pangea Stock, with an exercise price of five cents
per share and an expiration date on the fifth anniversary of issuance, for net
total proven reserves (as hereafter defined) resulting from energy projects
undertaken by the Employer, as follows: (1) Pangea shall grant the Employee
options to purchase
1,000,000 shares of Pangea Stock for the first five billion cubic feet ("BCF")
equivalent of net total proven reserves, (2) Pangea shall grant the Employee
options to purchase additional 1,000,000 shares of Pangea Stock for the second
ten BCF equivalent of net total proven reserves, and (3) thereafter, Pangea
shall grant the Employee options to purchase 1,000,000 shares of Pangea Stock
for each additional 25 BCF equivalent of net total proven reserves. For purposes
of this Agreement, net total proven reserves shall be determined by an
independent third party engineering reserve report from Netherland, Xxxxxx &
Associates, or such other reputable third party engineering service as Pangea
and the Employee may jointly approve in writing; and Pangea shall, at its sole
cost and expense, provide the Employee with such a report not less than once
each six months until all prospects initiated or contemplated during the
employment period shall have been fully completed and reported as herein
provided. For purposes of preparation of the net proven reserves report, the
conversion factor shall be six thousand cubic feet of gas to one barrel of oil.
Options shall continue to be granted to the Employee under this Paragraph 3(e)
following the termination of employment for net proven reserves discovered and
reported thereafter until all projects or prospects begun or contemplated prior
to employment termination have been fully completed and reported.
(f) The Employer will provide medical benefits to the Employee and his
immediate family having coverage and other terms at least equal to those in
effect for employees of the Employer on the date of this Agreement. The Employer
will not make any change in medical benefits coverage which would require
medical examination or underwriter qualification for the Employee or any member
of his immediate family.
4. Duties: In addition to all other obligations under this Agreement, the
parties will perform the duties described in this Paragraph 4.
(a) Duties of Employee: The Employee will serve as
President of the Employer. The Employee's duties may be reasonably modified at
the Employer's direction from time to time; however, no such modification shall
require the Employee to move his place of residence from Houston, Texas; and no
such modification shall be effective if it reduces the responsibility, authority
or status of the Employee relative to other employees of the Employer or Pangea
unless agreed to in writing by the Employee. Until his resignation, removal or
replacement by new election, the Employee agrees also to serve as a director of
the Employer and as Executive Vice President and Director of Pangea.
(b) Duties of Employer: In addition to payment of the compensation provided
for in this Agreement, the Employer will provide the Employee with sufficient
office facilities, equipment and staff for the efficient performance of his
duties.
(c) Duties of Pangea: In addition to granting the options provided for in
Paragraph 3 above, Pangea will use its best efforts to cause the Employer to
fulfill its obligations under this Agreement. In addition, Pangea will use its
best efforts to provide the Employer, either through intercompany loans or
additional equity contributions, with: (1) cash sufficient to pay the Employer's
accounts payable on the date of this Agreement, including, without limitation,
accounting and legal fees incurred by the Employer in the Employee's sale to
Pangea of all the Employer's issued and outstanding common capital stock , and
(2) a minimum of $5,000,000 for each consecutive twelve months of the employment
period for exploration and production of oil and gas, such minimum contribution
to be in addition to the Employer's cash flow from operations during the same
period. If Pangea is unable to provide the minimum $5,000,000 per year in
exploration and production funding in addition to cash flow, the Employee shall
have the option to purchase all of the Employer's common capital stock from
Pangea at the current value of its oil and gas assets, determined by the third
party last engaged to provide a net total proven reserve report under Paragraph
3(e). The Employee's option to purchase the Employer's
stock shall expire if not exercised in writing within 30 days after Pangea has
failed to meet its funding goal, and the closing of the option shall be at the
offices of the Employer within 90 days following Pangea's receipt of an exercise
notice. The purchase price for exercise of the share option shall be payable in
cash.
5. Employee to Devote Full Time to Employer: The Employee will devote full time,
attention, and energies to the business of the Employer and during this
employment, will not engage in any other business activity, regardless of
whether such activity is pursued for profit, gain, or other pecuniary advantage,
unless approved by the Employer. Employee is not prohibited from making personal
investments in any businesses, including, without limitation, oil and gas
investments owned on the date of this Agreement or which are not suitable for
the Employer or which have been declined by the Employer, provided those
investments acquired after the date of this Agreement do not require active
involvement in the operation of said companies.
6. Noncompetition; Confidentiality of Proprietary Information:
6.1 During the term of this Agreement and for a period of two years after
termination of his employment with the Employer for any reason whatsoever, the
Employee shall not directly or indirectly induce or attempt to influence and
employee of Pangea or the Employer to terminate such employment. For a period of
one year after the end of employment, the Employee shall not control, consult
with or be employed on any oil and gas exploration or production project
identified by the Employer during the employment period as an active or
potential business opportunity or within one mile from the lease boundary for
any such project. This clause is not meant to prohibit the Employee from working
in and or gaining compensation from the energy industry, but rather is meant
only to prohibit him from competing with the Employer on projects that were
business targets during the employment period. It is specifically understood and
agreed that the Employee shall have the
unrestricted right to engage in projects rejected or abandoned by the Employer.
6.2 During the term of this Agreement and at all times thereafter, the
Employee shall not use for his personal benefit, or disclose, communicate or
divulge to, or use for the direct or indirect benefit of any person, firm,
association or company other than the Employer, any confidential material or
information regarding the business methods, business policies, procedures or
techniques, research or development, projects or results, trade secrets, or
other knowledge or processes used or developed by the Employer or any names or
addresses of customers, or any data relating to past, present or prospective
customers or any other confidential information relating to or dealing the with
business of the Employer made known to the Employee or learned or acquired by
the Employee while employed by the Employer under the terms of this Agreement.
This Paragraph 6.2 shall not prevent the Employee from using knowledge,
information and skills possessed by the Employee prior to entering into this
Agreement.
6.3 The Employee acknowledges that the restrictions contained in the
foregoing subparagraphs, in view of the nature of the business in which the
Employer is engaged, are reasonable and necessary in order to protect the
legitimate interests of the Employer, and that any violation hereof would result
in irreparable injuries to the Employer. The Employee therefore acknowledges
that, in the event of his violation of any of these restrictions, the Employer
shall be entitled to obtain from any court of competent jurisdiction preliminary
and permanent injunctive relief as well as damages and an equitable accounting
of all earnings, profits, and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Employer may be entitled.
6.4 If the period of time or the area specified above shall be adjudged
unreasonable in any proceeding, then the period of time shall be reduced by such
number of months or
the area shall be reduced by the elimination of such portion thereof or both so
that such restrictions may be enforced in such area and for such time as if
adjudged to be reasonable. If the Employee violates any of the restrictions
contained in the foregoing subparagraph, the restrictive period shall not run in
favor of the Employee from the time of the commencement of any such violation
until such time as such violation shall be cured by the Employee to the
satisfaction of the Employer.
7. Reimbursement of Expenses: The Employee may incur reasonable expenses for
furthering the Employer's business, including expenses for entertainment,
travel, and similar items. The Employer shall reimburse the Employee for all
business expenses after the Employee presents an itemized account of
expenditures, pursuant to the Employer's policy.
8. Vacation: The Employee shall be entitled to a yearly vacation of four weeks
at full pay beginning at the date of employment, with the full vacation period
for the first employment year vesting and being available to the Employee from
the first day of employment.
9.Disability: If Employee cannot perform the duties because of illness or
incapacity for a period of more than ten (10) business days in succession, the
salary payment otherwise due under Paragraph 3(a) during said illness or
incapacity will be reduced by Seventy-five (75%) percent. The Employee's full
salary compensation will be reinstated upon return to work. Disability shall not
affect the Employee's rights to options for shares of Pangea stock unless
employment is terminated because of the disability, in which case the options
due the Employee under Paragraph 3(b) shall terminate as therein provided, but
options to be granted under Paragraph 3(e) shall continue as therein provided.
10.Termination of Agreement: With cause, the Employer may terminate the
employment relationship arising under this agreement at any time upon 30 days'
written notice to the Employee. If the Employer requests, the Employee will
continue to perform his duties and shall in any case be paid
his regular compensation, including Pangea share options, up to the date of
termination. In addition, the Employer will pay the Employee on the date of
termination a severance allowance of three months salary and Pangea share
options, less taxes and social security required to be withheld. Without cause,
the Employee may terminate employment upon 30 days' written notice to the
Employer. Employee may be required to perform his duties and will be paid the
regular salary and monthly Pangea share option compensation to date of
termination but shall not receive a severance package allowance. Notwithstanding
anything to the contrary contained in this agreement, upon payment of the
severance package allowance described in this Paragraph 10 for termination by
the Employer, the Employer may terminate the Employee's employment upon 30 days'
notice to the Employee should any of the following events occur:
a. The sale of substantially all of the Employer's assets to a single
purchaser or group of associated purchasers or;
b. The sale, exchange, or other disposition, in one transaction of the
majority of the Employer's outstanding corporate shares or;
c. The Employer's decision to terminate its business and liquidate its
assets;
d. The merger or consolidation of the Employer with another company; or
e. Bankruptcy or Chapter 11 Reorganization.
11. Death Benefit: Should Employee die during the term of employment; the
Employer shall pay to Employee's estate any compensation due through the end of
the month in which death occurred.
12. Assistance in Litigation: For a period of two years after termination of the
employment relationship arising under this Agreement, the Employee shall upon
reasonable
notice, furnish such information and proper assistance to the Employer as it may
reasonably require in connection with any litigation in which it is, or may
become, a party either during or after employment. The Employer shall pay the
Employee for time devoted to such litigation support activity at the rate of
compensation, both salary and Pangea share options, in effect at the date of the
termination of the employment relationship.
13. Arbitration: Any claim or controversy that arises out of or relates to this
agreement, or the breach of it, shall be settled by arbitration in accordance
with the rules of the American Arbitration Association. The arbitration
proceedings shall take place in Houston, Texas, and the arbitrators shall apply
Texas law in making their determination. Judgment upon the award rendered may be
entered in any court with jurisdiction.
14. Limited Effect of Waiver. Should either party waive breach of any provision
of this agreement by the other party, that waiver will not operate of be
construed as a waiver of further breach by the breaching party.
15. Severability: If, for any reason, any provision of this agreement is held
invalid, all other provisions of this agreement shall remain in effect.
16. Assumption of Agreement by Employer's Successors and Assignees: The
Employer's rights and obligations under this agreement will inure to the benefit
and be binding upon the Employer's successors and assignees.
17. Oral Modifications Not Binding: This instrument is the entire agreement of
the Employer, Pangea and the Employee with respect to the employment
relationship. Oral changes shall have no effect. If may be altered only by a
written agreement signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
18. Governing Law and Place of Performance: This Agreement
shall be interpreted under the laws of the State of Texas, and all payments of
compensation hereunder shall be payable in Xxxxxx County, Texas.
19. Purchase of Mass Energy Name: If the Employer ceases to engage actively in
the business of exploration for and production of oil, gas and other minerals,
the Employee shall have the right to purchase from the Employer, for the sum of
$1,000 cash, the trade name "Mass Energy," and upon such purchase, the Employer
and Pangea shall cease to use the purchased name and shall immediately change
its corporate name to a name which is not similar in any way to the trade name.
20. Preferential Purchase Right: During the period of employment hereunder and
for a period of five years thereafter, if Pangea, either through the Employer or
any other Pangea affiliate, receives and desires to accept an offer ("Offer")
for the purchase or other transfer of all, or of any substantial portion, of the
oil and gas properties owned by Pangea and/or its affiliates ("Mineral
Properties"), Pangea shall promptly give the Employee written notice ("Sale
Notice") of the Offer, including the name and address of the prospective
transferee (who must be ready, willing and able to purchase), identification of
the particular Mineral Properties involved, the proposed purchase price, and all
other terms of the Offer. Subject to the limitation in the last sentence of this
Paragraph, the Employee shall have an option in preference to the proposed
transferee to purchase for his own account ("Option") the Mineral Properties
subject to the Offer, at the price and otherwise on the terms described in the
Sale Notice. The Employee's Option shall expire if he has not given Pangea
written notice within ten days of his receipt of the Sale Notice stating his
intent to exercise the Option. If the Employee gives notice of his intention to
exercise the Option within the time allowed, the exercise of the Option shall be
closed at the offices of Pangea, or at such other location as Pangea and the
Employee may mutually agree, on or before the close of business on the 90th day
following the Employee's receipt of the Sale Notice.
However, notwithstanding any other provision in this Paragraph, the Employee
shall have no purchase option in the case of: (a) transfer of Mineral Properties
to another affiliate of Pangea, (b) transfer of Mineral Properties as mortgage
collateral, or (c) transfer of mortgaged Mineral Properties in lieu of or
pursuant to a mortgage foreclosure.
Signed this 5th day of October, 2000.
Mass Energy, Inc.
By:/s/ Xxxxxxx X. Xxxxxxx /s/Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxx
Authorized Agent
Pangea Petroleum Corporation
By:/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx,
Chief Executive Officer
