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EXHIBIT 10.16
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 employ Employee as its President and Chief
Financial Officer and Employee desires to accept such employment; and
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:
1. EMPLOYMENT. Employer hereby employs Employee to serve as the
President and Chief Financial Officer of Employer and otherwise at the direction
of the Board of Directors.
2. 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.
3. 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 February 1, 2001. 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 a bonus of up to $50,000 per year contingent upon the performance of
Employer reaching or exceeding the performance targets set by the Board of
Directors of Employer. Employer shall set the performance targets for each year
of the term of this Agreement at the same time that the Board of Directors
approves the budget for the year. The performance target for the first year are
set forth on Exhibit A.
4. AGREEMENT TO GRANT OPTIONS. Employer hereby grants to Employee,
effective the date of execution of this Agreement, an option to purchase certain
shares of Common Stock of Employer at the price and at the terms set forth
herein.
(a) 90,000 shares of Common Stock of Employer at the closing price of
Employer's Common Stock effective February 1, 2001; (the "Exercise Price"); and
(b) 60,000 shares of Common Stock of Employer at 175% of the Exercise
Price.
One twelfth (1/12) of such options shall vest on March 1, 2001, with a
like amount vesting on June 1, September 1, and December 1 of each year during
the term of this Agreement as provided for herein. All options granted hereunder
must be exercised within the Exercise Period, regardless
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of whether Employee subsequently voluntarily leaves the employment of Employer
or is terminated with or without "Cause" (as hereinafter defined). The Exercise
Period will be, if Employer remains a publicly traded company, a period
beginning with the date of the vesting of the first options and ending five
years after the last options are vested. If Employer ceases to be a publicly
traded company at any time during the Exercise Period, the Exercise Period will
end at either five years from the date Employer again becomes a publicly traded
company or the date upon which substantially all of the assets of Employer are
sold. 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. In the event
Employer issues any additional shares of Common Stock, the options granted under
Sec. 4(a) above, shall be increased by the product of multiplying (i) the number
of shares then subject to such grant, and (ii) the quotient created by dividing
the number of shares outstanding immediately after such issuance by the number
of shares outstanding immediately before such stock issuance, the number of
options so increased shall have an exercise price equal to the price at which
such additional shares were issued by Employer.
5. 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
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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 four (4) weeks, to be taken at such times as may be approved by
Employer.
6. TERM. The term of this Agreement shall be for three (3) years,
beginning from the effective date hereof and for year to year thereafter unless
terminated by either party by written notice given no later than ninety (90)
days' prior to the end of the primary term or any year of any extended term;
provided, however, if Employer elects to terminate this Agreement at the end of
the primary term or at the end of any year of any extender term and after a
Change of Control, Employee shall be entitled to the payment due under Sec. 9
hereof.
7. 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 (2) of
the Base Salary then in effect, as set forth in Section 3(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 5 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 5(a) hereof. In addition, any
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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.
(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.
8. TERMINATION BY EMPLOYER WITHOUT CHANGE OF CONTROL. 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 3(a), (b) or 4 (as to the
non-vested portions) 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
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a felony under state or federal law; (2) determination by the Board of
Directors that Employee has committed any material and intentional act
of dishonesty against Employer; or (3) 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 to Employee an amount that is the greater
of (i) the remaining unpaid Base Salary for the remaining term of this
Agreement, or (ii) $250,000. Also, Employer will provide to Employee, for the
period of one year following the date of termination, full benefits that
Employee would otherwise be entitled to receive under Sec. 5(a). In addition,
Employee will be, immediately upon the effective date of such termination,
become fully vested in all options granted under Sec. 4 in which Employee has
not vested as of the date of such termination.
9. TERMINATION BY EMPLOYER AFTER CHANGE OF CONTROL. In the event the
employment of Employee is terminated by Employer for any reason and at any time
during the term of this Agreement following a Change of Control, Employer will
immediately pay to Employee an amount that is the greater of (i) the remaining
unpaid Base Salary for the remaining term of this Agreement; or (ii) $250,000.
In addition, all unvested options shall be immediately vested and Employee shall
receive full benefits, set forth in paragraph above, for the term of one (1)
year following the date of such termination.
10. CHANGE OF CONTROL. For purposes of this Agreement, a "Change of
Control" shall mean any of the following: (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
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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; (ii) the acquisition by any new or existing shareholder (the
"Acquiring Shareholder") of enough shares of capital stock of Employer to cause
such Acquiring Shareholder to hold more than 50% of the outstanding capital
stock of Employer; or (iii) the sale or other disposition by Employer of
substantially all of the assets of Employer.
11. TERMINATION OF EXISTING EMPLOYMENT AGREEMENT AND STOCK OPTION
AGREEMENT. Employee agrees that, contemporaneously with the execution of this
Agreement, to terminate his existing employment agreement and stock option
agreement and agrees that no payment is due under the term of such employment
agreement and that any vested stock options shall terminate immediately upon the
execution of this Agreement.
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
11(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.
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If to Employee:
Inland Resources Inc.
410 17th Street, Suite 700
Denver, Colorado 80202
If to Employer:
Board of Directors
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 Washington.
(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
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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 and made
it effective on February 1, 2001.
EMPLOYER:
INLAND RESOURCES INC.
By: /s/ Marc MacAluso
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Marc MacAluso
Chief Executive Officer
EMPLOYEE:
/s/ Bill I. Pennington
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Bill I. Pennington
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SCHEDULE "A"
FINANCIAL PERFORMANCE TARGETS
A VOLUME OF PRODUCTION TO BE ESTABLISHED BY THE BOARD OF DIRECTORS AT THE NEXT
REGULAR MEETING, AND EITHER:
a. A MERGER OF EMPLOYER WITH ANOTHER COMPANY THAT IS ACCEPTABLE
TO THE BOARD; OR
b. A PUBLIC OFFERING OF EMPLOYER'S COMMON STOCK
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