Exhibit 10.1
EMPLOYMENT AGREEMENT
This employment agreement ("Agreement") is made and entered into as of this date
by and between TIDELANDS OIL & GAS CORPORATION ("Employer"), and XXXXX X. XXXXX
("Employee").
WHEREAS, Employer and Employee desire that the term of this Agreement begin on
October 1, 2004 ("Effective Date").
WHEREAS, Employer desires to employ Employee as its Senior Vice-President and
Chief Financial Officer and Employee is willing to accept such employment by
Employer, on the terms and subject to the conditions set forth in this
Agreement.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Duties. During the term of this Agreement, Employee agrees to be
employed by and to serve Employer as its Senior Vice-President and Chief
Financial Officer, and Employer agrees to employ and retain Employee in such
capacities. Employee shall devote a substantial portion of his business time,
energy, and skill to the affairs of the Employer as Employee shall report to the
Employer's Board of Directors and President and at all times during the term of
this Agreement shall have powers and duties at least commensurate with his
position as Senior Vice-President and Chief Financial Officer.
Section 2. Term of Employment.
2.1 Definitions. For the purposes of this Agreement the following terms
shall have the following meanings:
1. "Termination For Cause" shall mean termination by Employer of
Employee's employment by Employer by reason of Employee's
willful dishonesty towards, fraud upon, or deliberate injury
or attempted injury to, Employer or by reason of Employee's
willful material breach of this Agreement which has resulted
in material injury to Employer.
2. "Termination Other Than For Cause" shall mean termination by
Employer of Employee's employment by Employer (other than in a
Termination for Cause) and shall include constructive
termination of Employee's employment by reason of material
breach of this Agreement by Employer, such constructive
termination to be effective upon notice from Employee to
Employer of such constructive termination.
3. "Voluntary Termination" shall mean termination by Employee of
Employee's employment by Employment other than (i)
constrictive termination as described in subsection 2.1(b), or
(ii) termination by reason of Employee's death or disability
as described in Sections 2.5 and 2.6.
2.2 Initial Term. The term of employment of Employee by Employer shall be
for a period of four (4) years beginning with Effective Date ("Initial
Term"), unless terminated earlier pursuant to this Section. At any time
prior to the expiration of the Initial Term, Employer and Employee may
by mutual written agreement extend Employee's employment under the
terms of this Agreement for such additional periods as they may agree.
2.3 Termination For Cause. Termination For Cause may be effected by
Employer at any time during the term of this Agreement and shall be
effected by written notification to Employee. Upon Termination For
Cause, Employee shall promptly be paid all accrued salary, bonus
compensation to the extent earned, vested deferred compensation (other
than pension pay or profit sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of
the Employer in which Employee is a participant to the full extent of
Employee's rights under such plans, accrued vacation pay and any
appropriate business expenses incurred by Employee in connection with
his duties hereunder, all to the date of termination, but Employee
shall not be paid any other compensation or reimbursement of any kind,
including without limitation, severance compensation.
2.4 Termination Other Than For Cause. Notwithstanding anything else in this
Agreement, Employer may effect a Termination Other Than For Cause at
any time upon giving written notice to Employee of such termination.
Upon any Termination Other Than For Cause, Employee shall promptly be
paid all accrued salary, bonus compensation to the extent earned,
vested deferred compensation (other than pension plan or profit sharing
plan benefits which will be paid in accordance with the applicable
plan), any benefits under any plans of the Employer in which Employee
is a participant to the full extent of Employee's rights under such
plans (including accelerated vesting, if any, of awards granted to
Employee under the Employer's stock option plan), accrued vacation pay
and any appropriate business expenses incurred by Employee in
connection with his duties hereunder, all to the date of termination,
and all severance compensation provided in Section 4.1, but no other
compensation or reimbursement of any kind.
2.5 Termination by Reason of Disability. If, during the term of this
Agreement, Employee, in the reasonable judgment of the Board of
Director's of Employer, has failed to perform his duties under this
Agreement on account of illness or physical or mental incapacity, and
such illness or incapacity continues for a period of more than twelve
(12) consecutive months, Employer shall have the right to terminate
Employee's employment hereunder by written notification to Employee and
payment to Employee of all accrued salary, bonus compensation to the
extent earned, vested deferred compensation (other than pension plan or
profit sharing plan benefits which will be paid in accordance with the
applicable plan), any benefits under any plans of the Employer in which
Employee is a participant to the full extent of Employee's rights under
such plans, accrued vacation pay and any appropriate business expenses
incurred by Employee in connection with his duties hereunder, all to
the date of termination, with the exception of medical and dental
benefits which shall continue through the expiration of this Agreement,
but Employee shall not be paid any other compensation or reimbursement
of any kind, including without limitation, severance compensation.
2.6 Death. In the event of Employee's death during the term of this
Agreement, Employee's employment shall be deemed to have terminated as
of the last day of the month during which his death occurs and Employer
shall promptly pay to his estate or such beneficiaries as Employee may
from time to time designate all accrued salary, bonus compensation to
the extent earned, vested deferred compensation (other than pension
plan or profit sharing plan benefits which will be paid in accordance
with the applicable plan), any benefits under any plans of the Employer
in which Employee is a participant to the full extent of Employee's
rights under such plans, accrued vacation pay and any appropriate
business expenses incurred by Employee in connection with his duties
hereunder, all to the date of termination, but Employee's estate shall
not be paid any other compensation or reimbursement of any kind,
including without limitation, severance compensation.
2.7 Voluntary Termination. In the event of a Voluntary Termination,
Employer shall promptly pay all accrued salary, bonus compensation to
the extent earned, vested deferred compensation (other than pension
plan or profit sharing plan benefits which will be paid in accordance
with the applicable plan), any benefits under any plans of the Employer
in which Employee is a participant to the full extent of Employee's
rights under such plans, accrued vacation pay and any appropriate
business expenses incurred by Employee in connection with his duties
hereunder, all to the date of termination, but no other compensation or
reimbursement of any kind, including without limitation, severance
compensation.
2.8 Notice of Termination. Employer may effect a termination of this
Agreement pursuant to the provisions of this Section upon giving thirty
(30) days' written notice to Employee of such termination. Employee may
effect a termination of this Agreement pursuant to the provisions of
this Section upon giving thirty (30) days' written notice to Employer
of such termination.
Section 3. Salary, Benefits and Bonus Compensation.
3.1 Base Salary. As payment for the services to be rendered by Employee as
provided in Section 1 and subject to the terms and conditions of
Section 2, Employer agrees to pay to Employee a "Base Salary" for the
twelve (12) calendar months beginning the Effective Date at the rate of
$168,000 per annum payable in 24 equal bi-monthly installments of
$7,000. Employee's Base Salary shall be reviewed annually by the
Compensation Committee of the Board of Directors ("Compensation
Committee"), and the Base Salary for each year (or portion thereof)
beginning January 1, shall be determined by the Compensation Committee
which shall authorize an increase in Employee's Base Salary for such
year in an amount which, at a minimum, shall be equal to the cumulative
cost-of-living increment on the Base Salary as report in the "Consumer
Price Index, Seattle, Washington, All Items," published by the U.S.
Department of Labor (using January 1, 2004 as the base date for
computation).
3.2 Stock Grant. Employee shall be eligible to receive a common stock
grant, at Employee's option, for each year (or portion thereof) during
the term of this Agreement and any extensions thereof, in the amount of
Five Hundred Thousand (500,000) common shares annually. The initial
stock grant date will be October 1, 2004 and each successive year for
the four year term of the agreement.
3.3 Incentive Compensation. Employer agrees to pay Employee additional
compensation based upon a percentage of Employer's net profits after
income taxes and a percentage of Employer's net profits after income
taxes and a percentage of increase in sales (the "Additional
Compensation"), which must be paid to Employee each year within ten
(10) business days after Employer files its annual report on Form
10-KSB.
i. The amount of Additional Compensation to which Employee is
entitled each year will be determined in accordance with the following formulas:
(1) Employee is entitled to a distribution equal to
One percent (1.0%) of the net profits of Employer, after all taxes have been
deducted; and
(2) Employee is also entitled to a distribution equal
to One percent (1%) of the increase in sales over the previous year.
ii. Employee's entitlement to Additional Compensation is
effective for the fiscal year ending 2004, and for each subsequent fiscal year
of Employer during the term of this Agreement.
The Additional Compensation will be determined by the accountants
regularly auditing the books of Employer, in accordance with generally accepted
accounting principles consistently applied in the same manner as in prior fiscal
periods. The certificates of the firm of certified public accountants selected
as the regular auditors of Employer will be binding upon Employer and upon
Employee as to the amount of Additional Compensation.
iii. If, by reason of any change in Employer's accounting
principles or practices, the Additional Compensation to which Employee would
otherwise be entitled is adversely affected, appropriate adjustment will be made
so that the amount determined is the equivalent of the amount which would have
been determined prior to any change.
iv. If this Agreement is terminated for any reason during the
fiscal year of Employer, Employee is entitled to payment of a pro rata share of
the Additional Compensation to which Employee would have been entitled had
Employee remained employed for the entire fiscal year. The pro rata share will
be determined by computing the amount of Additional Compensation to which
Employee would have been entitled for that year if this Agreement were not
terminated, and multiplying that amount by a fraction, the numerator of which is
the number of months that Employee was employed, and the denominator of which is
12. This provision survives the termination of this Agreement.
v. These compensation provisions do not affect the right of
Employee (1) to receive any employee benefits provided comparable employees, or
(2) as a participant in the present or any future incentive profit-sharing or
bonus plan of Employer or in any present or future qualified stock option plan
of Employer or in the present or any future pension plan of Employer, applicable
generally to salaried employees. The Employee will continue as a participant or
beneficiary in any plans which continue in full force and effect and Employee
will have the right at any time to become a participant under or beneficiary of
any newly created plans according to their terms.
3.3 Additional Benefits. During the term of this Agreement, Employee shall be
entitled to the following fringe benefits:
A. Employee Benefits. Employee shall be eligible to participate in such
of Employer's benefits and deferred compensation plans as are now generally
available or later made generally available to executive officers of the
Employer, including, without limitation, Employer's Stock Grant and Option Plan,
profit sharing plans, annual physical examinations, dental and medical plans,
personal catastrophe and disability insurance, financial planning, retirement
plans and supplementary executive retirement plans, if any. For purposes of
establishing the length of service under any benefit plans or programs of
Employer, Employee's employment with the Employer will be deemed to have
commenced on the Effective Date.
B. Vacation. Employee shall be entitled to four (4) weeks of vacation
during each year during the term of this Agreement and any extensions thereof,
prorated for partial years.
C. Life Insurance. For the term of this Agreement any and all
extensions thereof, Employer shall at its expense procure and keep in effect
term life insurance on the life of Employee payable to Employer in the aggregate
amount of $1,000,000.
D. Automobile Allowance. For the term of this Agreement and any
extensions thereof the corporation shall provide officer with an automobile
allowance of $12,000 annually, which allowance shall be payable monthly in
increments of $1,000.
E. Reimbursement for Expenses. During the term of this Agreement,
Employer shall reimburse Employee for reasonable and properly documented
out-of-pocket business and/or entertainment expenses incurred by Employee in
connection with his duties under this Agreement.
Section 4. Severance Compensation.
4.1 Severance Compensation in the Event of a Termination Other Than For
Cause. In the event Employee's employment is terminated in a
Termination Other Than for Cause, Employee shall be paid as severance
compensation his Base Salary (at the rate payable at the time of such
termination), for a period of the lesser of the remaining portion of
the Initial Term of six (6) months from the date of such termination,
on the dates specified in Section 3.1; provided, however, that if
Employee is employed by a new employer during such period, the
severance compensation payable to Employee during such period will be
reduced by the amount of compensation that Employee is receiving from
the new employer, officer is under no obligation to mitigate the amount
owed to the officer pursuant to this Section by seeking employment or
other Employee shall be entitled to an accelerated vesting of any
awards granted to Employee under Employer's Stock Option Plan to the
extent provided in the stock option agreement entered into at the time
of the grant.
4.2 No Severance Compensation Upon Other Termination. In the event of a
Voluntary Termination, Termination For Cause, termination by reason of
Employee's disability pursuant to Section 2.5 or 2.6, Employee or his
estate shall not be paid any severance compensation.
Section 5. Outside Activities of Employee. Employer acknowledges that Employee
has commitments and business activities not related to the Employer and that
certain of these commitments and business affairs involve activities in the oil,
gas and real estate industries. There shall be no restriction on Employee's
ability to fulfill such commitments or engage in such business activities.
Section 6. Payment Obligations. Employer's obligation to pay Employee the
compensation and to make the arrangements provided herein shall be
unconditional, and Employee shall have no obligation whatsoever to mitigate
damages hereunder. If litigation after a Change in Control shall be brought to
enforce or interpret any provision contained herein, Employer, to the extent
permitted by applicable law and the Employers' Articles shall reimburse Employee
for Employee's reasonable attorneys' fees and disbursements incurred in such
litigation.
Section 7. Confidentiality. Employee agrees that all confidential and
proprietary information relating to the business of Employer shall be kept and
treated as confidential both during and after the term of this Agreement, except
as may be permitted in writing by Employer's Board of Directors or as such
information is within the public domain or comes within the public domain
without any breach of this Agreement.
Section 8. Withholdings. All compensation and benefits to Employee hereunder
shall be reduced by all federal, state, local and other withholdings and similar
taxes and payments required by applicable law.
Section 9. Indemnification. In addition to any rights to indemnification to
which Employee is entitled to under the Employers' Articles of Incorporation and
Bylaws, Employer shall indemnify Employee at all times during and after the term
of this Agreement to the maximum extent permitted under Nevada Revised Statutes
or any successor provision thereof and any other applicable state law, and shall
pay Employee's expenses in defending any civil or criminal action, suit, or
proceeding in advance of the final disposition of such action, suit or
proceeding, to the maximum extent permitted under such applicable state laws.
Agreed and accepted this 1st day of October 2004.
Employer:
Tidelands Oil & Gas Corporation
by: _______________________
Xxxxxxx X. Xxxx
President
Employee:
___________________________
Xxxxx X. Xxxxx
