EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and
between INLAND RESOURCES INC. (hereinafter referred to as "Employer") and
BILL I. PENNINGTON (hereinafter referred to as "Employee").
WHEREAS, Employer desires to continue the employment of Employee as
its Chief Executive Officer and Chief Financial Officer and Employee desires
to continue such employment; and
WHEREAS, Employer and Employee have previously entered into an
Employment Agreement dated June 1, 1996, as amended (the "Original Employment
Agreement"), and Employer and Employee desire to mutually terminate the
Original Employment Agreement in connection with the execution of this
Agreement; and
WHEREAS, Employer has granted options and warrants (collectively the
"Existing Options/Warrants") to Employee exercisable for 235,000 shares of
common stock, par value $.001 per share (the "Common Stock"), of Employer,
and Employer and Employee desire to mutually terminate the Existing
Options/Warrants in connection with this Agreement, and grant new options to
Employee as provided herein.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Employer and Employee agree as
follows:
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1. TERMINATION OF ORIGINAL EMPLOYMENT AGREEMENT. Employer and
Employee hereby agree that the Original Employment Agreement is terminated
effective the date hereof.
2. TERMINATION OF EXISTING OPTIONS/WARRANTS. Employer and
Employee hereby agree that the Existing Options/Warrants are terminated
effective the date hereof.
3. AGREEMENT TO GRANT OPTIONS. Employer hereby grants to
Employee, effective the date of execution of this Agreement, an option to
purchase 875,000 shares of Common Stock exercisable at the closing sale price
of the Common Stock on the date of execution of this Agreement. The number of
option shares granted herein shall be increased or decreased to the same
extent that the outstanding shares of Common Stock of Employer are increased
or decreased by any stock split occurring after the effective date of this
Agreement. Such options shall vest over a period of five years, as provided
for herein. On each of the first four anniversary dates of the effective date
of this Agreement, ten percent (10%) of such options shall be vested and, on
the fifth anniversary of the date of execution of this Agreement, the
remaining sixty percent (60%) shall vest. All options granted hereunder will
be exercisable for a period of five years after the last options are vested,
regardless whether Employer subsequently voluntarily leaves the employment of
Employer or is terminated with or without "Cause" (as hereinafter defined).
Options will vest on each such anniversary date if Employee continues to be
employed by Employer on such anniversary date. All non-vested options will
vest immediately upon a "Change of Control" (as hereinafter defined).
Employer will concurrently with execution of this Agreement prepare an Option
Agreement incorporating these terms and such other standard terms as have
been contained in prior options or warrants granted to Employee.
4. EMPLOYMENT. Employer hereby employs Employee to serve as
Chief Executive Officer and Chief Financial Officer of Employer and otherwise
at the direction of the Board of Directors.
5. DUTIES. During his employment, Employee shall devote all of
his working time, energies and skills to the management of Employer's
business. Employee agrees to serve Employer diligently and to the best of his
ability. Employee shall render services consistent with those of a person in
his position and shall perform all duties incident to such office and all
such further similar duties that may, from time to time, be assigned to him
by Employer. Employee's duties include finding further business opportunities
for Employer and Employee agrees to bring to Employer for acceptance or
rejection all business opportunities located by or made available to Employee.
6. COMPENSATION. Employee's compensation for services
performed under this Agreement shall be as follows:
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(a) BASE SALARY. Employer shall pay Employee a base
salary ("Base Salary") of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) per year, commencing effective October 1, 1999. In
addition, the Board of Directors of Employer shall, in good faith,
consider granting increases in such salary based upon such factors as
Employee's performance and the growth and/or profitability of Employer,
but it shall have no obligation to grant any such increases in
compensation. Such Base Salary shall be payable in equal monthly
installments, or at such other times and in such installments as may be
agreed upon between Employer and Employee. All payments shall be
subject to the deduction of payroll taxes and similar assessments as
required by law.
(b) BONUS. In addition to the Base Salary, Employee shall
be eligible to receive bonus compensation in such amounts and at such
times as the Board of Directors shall, from time to time, determine.
(C) TERMINATION PAYMENT. If Employee's employment is
terminated by the Company for any reason prior to September 30, 2001
(i.e., with "Cause" or without "Cause"), Employee shall be paid a
termination payment, computed below, payable immediately upon the date
of termination. However, if Employee voluntarily leaves the employment
of Employer prior to September 30, 2001, payment of the termination
payment shall be forfeited by Employee. The termination payment shall
be $168,000, which amount shall be decreased by the sum of $21,000 for
each calendar quarter during which Employee's employment is retained by
Employer. For example, the termination payment shall be decreased by
$21,000 on each of January 1, 2000, April 1, 2000, July 1, 2000,
October 1, 2000, January 1, 2001, April 1, 2001, July 1, 2001 and
September 30, 2001.
(d) PERFORMANCE BONUS. In addition to the Base Salary and
the bonuses payable pursuant to Sections 6(b) and (c) hereof, Employer
shall pay to Employee a performance bonus of $250,000, as follows: (A)
one-third shall vest on each of the years ending December 31, 2000,
December 31, 2001 and December 31, 2002 provided (i) Employee continues
to be employed by Employer on such dates and (ii) Employer has met the
financial performance targets for each of such years; such financial
performance targets to be determined by the Board of Directors (and
approved by Trust Company of the West) at a later date and attached to
this Agreement as Schedule "A" and (B) shall be payable equally, if
vested, on December 31, 2003, December 31, 2004 and December 31, 2005.
Upon a "Change of Control", any unvested portion of the performance
bonus shall be deemed to be immediately vested and shall be paid to
Employee immediately if Employee is terminated within ninety days of
such Change of Control. If Employee voluntarily leaves the employment
of Employer, Employee shall forfeit any unpaid vested installments.
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7. EXPENSES AND BENEFITS. Employee is authorized to incur
reasonable expenses in connection with the business of Employer, including
expenses for entertainment, travel and similar matters. Employer will
reimburse Employee for such expenses upon presentation by Employee of such
accounts and records as Employer shall, from time to time, require. Employer
also agrees to provide Employee with the following benefits:
(a) EMPLOYEE BENEFIT PLANS. Employee shall be entitled to
participate in employee benefit plans or programs of Employer, if any,
to the extent that his position, tenure, salary, age, health and other
qualifications make him eligible to participate, subject to the rules
and regulations applicable thereto. Such additional benefits shall
include, subject to the approval of the Board of Directors, full
medical, dental and disability income insurance.
(b) OTHER. Such items and benefits as Employer shall,
from time to time, consider necessary or appropriate to assist Employee
in the performance of his duties.
(c) VACATIONS. Employee shall be entitled (in addition to
the usual public holidays) to a paid vacation for a period in each
calendar year not exceeding three (3) weeks, to be taken at such times
as may be approved by Employer.
8. TERM. The term of this Agreement shall be for a term of one
(1) year, beginning from the effective date hereof and for month to month
thereafter unless terminated by either party on thirty (30) days' notice.
9. DISABILITY. In the event that Employee becomes Permanently
Disabled (as hereafter defined) during the term of this Agreement and while
engaged in the scope of his employment by Employer, Employee shall continue
in the employ of Employer but his compensation hereunder shall be reduced to
one-half (1/2) of the Base Salary then in effect, as set forth in Section
6(a) hereof, commencing upon the determination of Employee's Permanent
Disability and continuing thereafter until the first to occur of (a) twelve
(12) months or (b) the death of Employee or (c) the expiration of the term of
this Agreement; and during such period of time, Employee shall not be
entitled to payment of expenses or benefits specified in Section 7 hereof
(except for reimbursement of expenses incurred by Employee prior to becoming
Permanently Disabled), except that Employer shall continue to provide
Employee with the insurance benefits specified in Section 7(a) hereof. In
addition, any compensation payable to Employee by Employer shall be reduced
by any amount which Employee is eligible to receive from workers
compensation, social security or disability insurance provided by Employer.
If Employee becomes Permanently Disabled while not engaged in the scope of
his employment by Employer, such disability may be cause for termination for
"Cause" under Section 10 hereof.
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(a) DEFINITION OF DISABILITY. For purposes of this
Agreement, the terms "Permanent Disability" or "Permanently Disabled"
shall mean three (3) months of substantially continuous disability.
Disability shall be deemed "substantially continuous" if, as a
practical matter, Employee, by reason of his mental or physical health,
is unable to sustain reasonably long periods of substantial performance
of his duties. Frequent long illnesses, though different from the
preceding illness and though separated by relatively short periods of
performance, shall be deemed to be "substantially continuous".
Disability shall be determined in good faith by the Board of Directors
whose decision shall be final and binding upon Employee. Employee
hereby consents to medical examinations by such physicians and medical
consultants as Employer shall, from time to time, require.
10. TERMINATION BY EMPLOYER. Employer shall have the right to
terminate Employee's employment as hereinafter provided.
(a) TERMINATION BY EMPLOYER FOR CAUSE. The Board of
Directors shall have the right to terminate Employee's employment under
this Agreement for Cause, in which event no compensation under Sections
6(a), (b) or (d) shall be paid or other benefits furnished to Employee
after termination for Cause. Termination for Cause shall be effective
immediately upon notice sent or given to Employee.
(i) DEFINITION OF CAUSE. For purposes of this
Agreement, the term "Cause" shall mean and be strictly limited
to: (1) conviction of a crime constituting a felony under
state or federal law; (2) determination by the Board of
Directors that Employee has committed any act of dishonesty
against Employer; (3) gross negligence by Employee in carrying
out his duties; (4) breach of this Agreement by Employee; (5)
gross misconduct by Employee, such as intoxication on the job,
use of drugs on the job for non-medical purposes or other
misconduct which has a substantial adverse effect on the
business of Employer; or (6) Employee becoming Permanently
Disabled while not engaged in the scope of his employment by
Employer.
(b) TERMINATION BY EMPLOYER WITHOUT CAUSE. The Board of
Directors shall have the right to terminate Employee's employment under
this Agreement without Cause at any time, by giving written notice of
termination to Employee. In such event, Employer will immediately pay
the sum of the remaining amount, if any, set forth in Sec. 6(c) and the
amount vested under Sec. 6(d) above.
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11. CHANGE OF CONTROL. For purposes of this Agreement, a
"Change of Control" shall mean: (i) the issuance of shares of capital stock
of Employer or the granting of options or other derivative securities
representing on a combined basis more than 50% of the outstanding capital
stock following such issuance and grant, or the issuance of shares of capital
stock by Employer or the granting of options or other derivative securities
to a person who, when added to shares acquired by such person in the market
or from other stockholders of Employer, would result in such person owning
more than 50% of the outstanding capital stock (assuming for this purpose,
exercise of such options or other derivative securities) of Employer; or (ii)
the sale or other disposition by Employer of substantially all of the assets
of Employer.
12. GENERAL PROVISIONS.
(a) NOTICES. Any notices to be given hereunder by either
party to the other may be effected by personal delivery, in writing or
by mail, registered or certified, postage prepaid with return receipt
requested. Mailed notices shall be addressed to the parties at the
addresses set forth below, but each party may change his or its address
by written notice in accordance with this Section 12(a). Notices
delivered personally shall be deemed communicated as of the actual
receipt; mailed notices shall be deemed communicated as of three (3)
days after mailing.
IF TO EMPLOYEE:
Inland Resources Inc.
410 17th Street, Suite 700
Denver, Colorado 80202
IF TO EMPLOYER:
Inland Resources Inc.
410 17th Street, Suite 700
Denver, Colorado 80202
(b) PARTIAL INVALIDITY. If any provision in this
Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remaining provisions shall, nevertheless,
continue in full force without being impaired or invalidated in any
way.
(c) LAW GOVERNING AGREEMENT. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Colorado.
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(d) ATTORNEYS' FEES AND COSTS. If any action at law or in
equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any
other relief to which he or it may be entitled.
(e) ASSIGNMENT. This Agreement shall inure to the benefit
of and bind the parties hereto and their respective legal
representatives, successors and assigns.
(f) ENTIRE AGREEMENT. This Agreement supersedes any and
all other agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by Employer and
contain all of the covenants and agreements between the parties with
respect to such employment. Each party to this Agreement acknowledges
that no representations, inducements, or agreements, oral or otherwise,
have been made by any party, or anyone acting on behalf of any party,
which are not embodied herein, and no other agreement, statement or
promise not contained in this Agreement shall be valid or binding. Any
modification of this Agreement will be effected only if it is in
writing signed by the party to be charged.
IN WITNESS WHEREOF, the parties have executed this Agreement on October
21, 1999, but to be effective the 1st day of October, 1999.
EMPLOYER:
INLAND RESOURCES INC.
By: /s/ Michael J. Stevens
-------------------------
Michael J. Stevens
Vice President
Secretary and Treasurer
EMPLOYEE:
/s/ Bill I. Pennington
----------------------------------
Bill I. Pennington
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SCHEDULE "A"
FINANCIAL PERFORMANCE TARGETS
[FINANCIAL PERFORMANCE GOALS TO BE ESTABLISHED AT A LATER DATE BY THE
BOARD OF DIRECTORS AND APPROVED BY TRUST COMPANY OF THE WEST]
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