EXHIBIT 10.31
SETTLEMENT AGREEMENT
This Settlement Agreement is made between R. Dirk Stinson ("Dirk"), George
Liszicasz ("George"), Pinnacle Oil International, Inc. ("Pinnacle") and Momentum
Resources Corporation ("Momentum") as of this 27th day of April, 1999.
1. Dirk agrees that he will relinquish his position as President of Pinnacle
and its subsidiaries to Daniel Topolinsky ("Daniel") effective as of the
date and time that Daniel Topolinsky assumes such positions, and Pinnacle
agrees that Dirk shall have no further obligations as an employee of
Pinnacle and/or its subsidiaries thereafter, under his Employment Agreement
with Pinnacle or otherwise.
2. Effective as of the date and time as Daniel Topolinsky becomes President of
Pinnacle, Dirk will become a "Consultant" to Pinnacle for "strategic
planning issues", as and when, requested by George, Daniel and/or the Board
of Pinnacle from time-to-time. In connection therewith, Dirk and Pinnacle
will enter into a non-exclusive Consulting Agreement for a term ending on
December 31, 2002. The parties agree that Dirk's consulting obligations
will supercede his employment obligations under his Employment Agreement
with Pinnacle, and will provide that Dirk will be paid U.S. $1,000 per
month for the provision of these consulting services, which amount shall be
deemed fully earned as of the date of this Agreement, even if Pinnacle
should elect not to utilize Dirk's consulting services, or should Dirk be
unable to perform the consulting services for any reason. The Consulting
Agreement will provide that Dirk will use reasonable efforts to be
available by telephone, email or fax to provide consulting services to
Pinnacle relating to strategic, corporate or project financing, and/or
investor relations questions or issues as requested by George, Daniel
and/or the Board of Pinnacle for a reasonable period of time not to exceed
(without Dirk's consent) the greater of eight hours per month and 96 hours
per year in the aggregate. Dirk's personal presence will not be required to
provide these services.
3. Pinnacle, George and Dirk agree that Dirk's change in position from
President to Consultant reflects the evolution of Pinnacle from a
development stage company to an operating company, and the mutually agreed
replacement of Dirk as President by Daniel as an experienced oil and gas
executive, and there are no outstanding issues between Dirk and Pinnacle in
connection with this change of position and responsibilities or any other
matter.
4. Pinnacle, George and Dirk agree that all payments to Dirk that would have
occurred under his Employment Agreement shall continue under the Consulting
Agreement, and that all of Dirk's benefits thereunder shall accordingly be
deemed fully earned and vested as of the date of his execution of this
Settlement Agreement (although payment thereof shall continue as provided
in the Employment Agreement until the December 31, 2002 scheduled
expiration of the Employment Agreement); provided, however, the parties
further agree as follows:
(a) Dirk will not be paid a cell phone allowance or auto allowance.
(b) Dirk will not be entitled to any bonuses to be paid at the discretion
of the Board of Pinnacle.
(c) After the expiration of six months, Dirk will agree to defer the
payment of one-half of his combined monthly salary pursuant to an
unsecured promissory note payable upon demand, together with interest
at prime plus 2%, at such time as Pinnacle is realizing average net
revenues over expenses (each determined on a cash flow basis) of U.S.
$100,000 per month over a consecutive three month period. In
determining cash flow, actual expenses for SFD technology and data
acquisition development will be included, while amortization for SFD
technology and data acquisition development will be excluded, capital
investments in oil and has projects will be excluded, and bonuses paid
to Pinnacle directors and employees will be excluded. This deferral
will cease to apply and the promissory note will be payable upon
Pinnacle raising U.S. $3,500,000 of equity financing, exclusive of the
exercise of warrants by SFD Investment LLC if such warrants are
exercised or US $5,000,000 if such warrants are not exercised.
(d) Dirk will receive his annual non-discretionary performance bonus on
the same basis as provided in his Employment Agreement (i.e., if net
income after taxes exceeds $5 million, a bonus equal to 5% of net
income after taxes); provided, however, the period for which Dirk
shall be paid this performance bonus under will be extended for one
year (i.e., to December 31, 2003).
5. Dirk will remain a Non-Series A Director of Pinnacle, but will resign his
position as a director of each of Pinnacle's subsidiaries.
6. George agrees to cooperate in nominating, and to the extent necessary
voting his shares in favor of, two Non-Series A Director nominees selected
by Dirk (one of which will be Dirk should he continue as a director).
Should the number of Non-Series A Directors be increased to nine or more,
George agrees to cooperate in nominating, and to the extent necessary
voting his shares in favor of, three Non-Series A Director nominees
selected by Dirk (one of which will be Dirk should he continue as a
director).
7. Dirk agrees to cooperate in nominating, and to the extent necessary (after
ensuring the election of his nominees described in the immediately
preceding paragraph) voting his shares in favor of, four Non-Series A
Director nominees selected by George (one of which will be George should he
continue as a director). Should the number of Non-Series A Directors be
increased to nine or more, Dirk agrees to cooperate in nominating, and to
the extent necessary (after ensuring the election of his nominees described
in the immediately preceding paragraph) voting his shares in favor of, six
Non-Series A Director nominees selected by George (one of which will be
George should he continue as a director).
8. Each of Dirk and George agrees to grant to the other the first right to
purchase any of their Pinnacle stock sold in a "block sale". Block sale
will be defined as a sale of Pinnacle stock to a single purchaser or
purchasers acting in concert by way of a single sale or series of
transactions involving 500,000 shares of Pinnacle. The non-selling party
will be granted the first right to purchase, for 30 days, the stock which
the selling party plans to sell at the specified sale price. If the non-
selling party does not purchase the stock within the 30 day period, the
selling party may sell the stock during the next 180 day period for a price
at or higher than the specified price without again offering the stock to
the non-selling party.
9. The above voting and purchase rights will apply to December 31, 2003 and
each of Dirk and George will enter into a Voting Trust Agreement to
facilitate the foregoing if requested by the other.
10. Pinnacle and Momentum will review their relationship and unless there is a
reasonable risk that the confidentiality of the SFD technology cannot be
maintained, will amend the Restated Technology Agreement:
(a) to provide that Momentum will directly license the SFD technology to
Pinnacle for exclusive hydrocarbon exploitation purposes, although
Momentum will nevertheless retain title to the SFD technology and all
improvements to the SFD technology made my Momentum;
(b) to provide that Pinnacle may directly fund improvements to the SFD
technology which expenditures will be treated as advances against
Momentum's royalties; provided that Momentum, acting though Dirk, will
be provided an annual budget and the right to audit these costs and to
have such costs approved by an independent auditor as fair, reasonable
and necessary costs for the development of the SFD technology; and
(c) to address any other matters directly related to the Pinnacle-Momentum
relationship which need to be addressed including the "Change in
Control" provision in the Restated Technology Agreement.
To the extent there are any other issues, Pinnacle and Momentum will
discuss a mutually satisfactory method to resolve these issues on a case by
case basis.
11. Pinnacle and Momentum will not further amend the Restated Technology
Agreement in any manner that will adversely affect Pinnacle's rights under
the agreement without the consent of (i) a majority of the Non-Momentum
related Pinnacle directors, and (ii) a majority of Pinnacle's Non-Momentum
related stockholders. Amendments which will not adversely affect Pinnacle
need only be approved by a majority of the Non-Momentum related Pinnacle
directors.
12. George and Dirk will also meet and review the operating costs and other
matters relating to Momentum operations including Dirk's plans to make
Momentum an operating company. George agrees to give reasonable
consideration to Dirk's plans and to work in good faith with Dirk to reach
a mutually acceptable agreement on these matters.
13. In addition to the acts and deeds recited herein and contemplated to be
performed, executed and/or delivered by each party herein, each party
agrees to perform, execute and/or deliver or cause to be performed,
executed and/or delivered any and all further
acts, deeds and assurances as may, from time to time, be reasonably
required by the other party to consummate the transactions contemplated in
this Settlement Agreement.
14. This Settlement Agreement shall be governed by the laws of the Province of
Alberta and shall bind and inure to the benefit of the parties and their
respective successors and assigns and all parties agree to submit to the
non-exclusive jurisdiction of the Alberta courts.
15. This Settlement Agreement may be executed in several counterparts, each of
which shall be deemed an original, and all of such counterparts together
shall constitute one agreement, binding on all parties hereto. If a copy or
counterpart of this Settlement Agreement is originally executed and such
copy or counterpart is thereafter transmitted electronically by facsimile
or similar device, such facsimile document shall for all purposes be
treated as if manually signed by the party whose facsimile signature
appears.
16. The parties hereto expressly acknowledge and agree that, with regard to the
subject matter of this Settlement Agreement and the transactions
contemplated herein, (1) there are no oral agreements between the parties
hereto and (2) this Settlement Agreement (a) embodies the final and
complete agreement between the parties, (b) supersedes all prior and
contemporaneous negotiations, offers, proposals, agreements, commitments,
promises, acts, conduct, course of dealing, representations, statements,
assurances and understandings, whether oral or written, and (c) may not be
varied or contradicted by evidence of any such prior or contemporaneous
matter or by evidence of any subsequent oral agreement of the parties
hereto.
17. No modification hereof shall be binding unless set forth in writing and
signed by the party or parties to be bound by the modification.
Executed this 27/th/ day of April, 1999.
/s/ R. Dirk Stinson
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Witness Dirk Stinson
/s/ George Liszicasz
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Witness George Liszicasz
PINNACLE OIL INTERNATIONAL, INC.
Per: /s/ R. Dirk Stinson
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Per: /s/ George Liszicasz
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MOMENTUM RESOURCES CORPORATION
Per: /s/ R. Dirk Stinson
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Per: /s/ George Liszicasz
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